Responding to today’s Pensions Green Paper - ‘Simplicity, Security and Choice: Working and saving for retirement’, Mary Francis, Director General of the ABI (Association of British Insurers), said: “The Government needed to breathe life into its pensions strategy. Today’s proposals contain some useful elements but we doubt that they will fully bridge the savings gap”.

“The Government has said that those who can save should save. We agree. But people are either not saving at all, or not saving enough for a comfortable retirement. That is a massive problem. ”

Mary Francis continued: “The Pensions Green Paper proposes some welcome changes: a radically simpler tax regime and simpler pensions will undoubtedly help remove some of the barriers to saving; so too will ensuring that people know more about their need to save for retirement; and we are pleased that the Government has recognised the need for flexibility in retirement. We agree with this voluntarist approach.

“But these measures, welcome though they are, are not enough to get to the heart of the pensions crisis. They alone will not add money to people’s pensions schemes. Over the next few months, as the Government consults on the Green Paper, we will continue to call for positive measures that will actively encourage a greater level of saving. These must include the introduction of financial incentives to help more employers contribute to the pension schemes of their employees.”
 
On the basis of early impressions the ABI has assessed what the Green Paper proposals are likely to mean for savers in the Government’s stakeholder pension target income group:

  

	Green paper proposals		ABI proposals
	Total weekly income £pw	Total weekly income %final salary	Total weekly income £pw	Total weekly income %final salary
Gordon1	£290	55%	£353	67%
Ruth2	£337	64%	£353	67%
Andrew3	£229	44%	£258	49%

1. age 25, earning £15,000pa, member of a stakeholder scheme with no employer contribution. Gordon contributes 50pm. Expects to retire at 65.

2. age 25, earning £25,000, member of a stakeholder scheme with a 5% employer contribution. Ruth also contributes £50pm. Expects to retire at 65.

3. age 25 and self-employed. Saves £50pm. Earns £15,000 pa. Expects to retire at 65.

Mary Francis continued: “To close Britain’s £27bn a year savings gap we need radical reform to help ordinary savers. We endorse the Government’s call to renew its partnership with savers, employers, and the savings industry. We will play our full part in this partnership so that people are encouraged to save and are rewarded for doing so.”

- Ends -

Notes

Enquiries to:
Emma Grainge    020 7216 7392 (Mobile: 07712 841183)
Leonie Edwards  020 7216 7411 (Mobile: 07712 841184)
Malcolm Tarling   020 7216 7410 (Mobile: 07776 147 667) 

Notes to Editors:
1. Attached is the ABI position on some of the specifics of the Green Paper.
2. Attached are full details of what the Pensions Green Paper means for savers in the stakeholder target market.
3. Attached are 10 pensions key facts.
4. Before the Green paper was published we set five tests by which we would judge the Green Paper:
· Better pensions for the self-employed. The Green paper makes some helpful suggestions but stops short of recommending that the self-employed should be required to have a second pension. This simple measure could help 2m people and take £2.5m off the savings gap.
· Greater flexibility, simplicity and choice on retirement. The government’s proposals on annuity reform are welcome. But money-back guarantee annuities, popular amongst consumers, would complete the package of annuity reform giving pensioners real flexibility and value for money.
· More incentives to save. The government has failed to introduce any significant incentives to encourage more pension saving. Without these incentives we will not see a step change in savings patterns. The ABI’s recommended Pension Contribution Tax Credit and Advice Credits could generate over £5bn in new pension saving.
· Radical tax reform. We warmly welcome the proposals to create a single tax regime for pensions and set a lifetime fund limit of £1.4 million.
· Wider understanding of pensions. With half the population knowing little about pensions, the need to generate greater understanding is clear. We therefore welcome the government’s intentions in this area. But more education and information alone will not be enough to raise levels of pensions saving.
5. The Association of British Insurers represents over 400 insurance companies. 30% of the money saved by individuals in the UK is held in insurance products. Insurance administered pensions account for 43% of all pensions the UK. In 2001 fund under management for insurance administered occupational schemes was £195bn, for insurance administered personal pensions the figures was £325bn.
6. An ISDN line is available for interviews.