As Ministers put the final touches to the Pensions Green Paper, the ABI (Association of British Insurers) highlights the need for the Government to make lasting changes to the pensions landscape, and to act now to close Britain’s growing £27bn annual savings gap.

The ABI has developed five tests by which the industry will judge the Green Paper. Commenting on the importance of the forthcoming Green Paper and these tests, Mary Francis Director, General of the ABI said:

“As people live longer and the shift away from Defined Benefit schemes accelerates, the Government faces one of its biggest challenges – to encourage people to save more and to start saving earlier. To meet this challenge we need a trusted pensions framework which is more accessible, flexible and attractive to all.

“The pensions industry is an essential partner in this new landscape. But people need greater incentives to save. We will be looking to the Government to seize the opportunity it now has to propose simple but effective building blocks for reform.

“The Government has the chance to improve the pensions landscape and make a real difference. But if, against our tests, the Green Paper gets just high marks for presentation and low marks for action, it will have failed. It is vital that the Government gets this right”

The ABI tests are:

1, Will it lead to better pensions for the self-employed?  Bringing self-employed people into the system of second-tier pensions (either the state second pension or a private equivalent) would put 2.5 million people on an equal footing with other workers and could take £2bn a year off the savings gap.

2, Will it create greater flexibility, simplicity and choice on retirement? Our proposals for a money-back guaranteed annuity would allow people to get value for money from their annuity if they die soon after purchase. This change would remove one of the inhibitions to greater pensions saving and is a concept supported by 49% of people.

3, Will it increase incentives to save, particularly for people at work? Those that can save should, but many aren’t and will need extra encouragement to do so. The workplace is the key to unlocking greater pension saving. The ABI has proposed tax incentives for employers that will help them help their employees save. Our proposal for a Pensions Contribution Tax Credit and Advice Credit could help generate £5 billion a year in new or increased saving. Incentives already in place should not be removed.

4, Does it simplify the pension tax regime? The complexities of the current system make it difficult for people to start saving. A simpler tax regime, which makes it easier for advisers to offer advice on the benefits of saving in a pension, is essential. The industry is calling for a single tax regime for pensions, including the introduction of a lifetime limit on saving to replace the existing confused arrangements.

5, Will it build wider awareness and understanding of the need to save? Until people fully appreciate the need to save any changes will be limited in their benefits. The Green Paper must include proposals for an active and well funded campaign to provide information and generic advice so that millions of people can make informed decisions and understand the risks of not saving.

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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. The ABI is the trade association for Britain’s insurance industry. Its more than 400 member companies provide over 97% of the insurance business in the UK. We represent insurance companies to the Government, and to the regulatory and other agencies, and provide a wide range of services to our members. ABI member companies account for more than a fifth of investments in the London stock market.

2. An ISDN line is available for interviews.