SPC NEWS SUMMARY AUGUST 2002

The Pickering Review on pensions (published by the Treasury July 11th) won't do nearly enough to halt the decline in company pension schemes.

SPC President Donald Duval said: "Alan Pickering's recommendations are nowhere near radical enough to stop companies shutting good pension schemes or to encourage employers which don't have a pension scheme to start them up.

"Having said that, I appreciate his remit was very narrow. He wasn't allowed to suggest some of the things which should be done. He proposed some relaxation of the rules - but stopped short of allowing employers complete freedom to design schemes which suit them and their employees.

"To avoid future generations of pensioners being primarily dependent on the State, we need employers with pension schemes to keep them going, and we need employers without pension schemes to start them."

To achieve this, said Duval, the Government must address at least some of the following issues:-

* The reduction in tax incentives for pension schemes consequent on reduction in direct tax rates

* Competition from other tax advantaged savings (ie ISAs), which have far less restrictions on their use - pension savings are tied up till retirement; money can be withdrawn from ISAs at any time

* the removal of dividend tax credits

* lack of concurrency between pension arrangements

* social exclusion of some employees (high earners are effectively precluded from membership of the main company scheme - which means that senior managers commonly see the scheme only as a cost, not as a benefit)

* inadequate rebates for contracting out of the State Second Pension

* a means test system which makes modest pension provision for the low paid liable to an effective tax rate of at least 50%

* a regime for financial advice which prevents employers 'selling' the advantages of their pension schemes to staff - 
and also discourages saving generally.

Relaxing rules on financial advice would promote better levels of saving 

Many would-be savers and employers are being put off pensions plans – by too much regulation.

In the wake of today’s Sandler report from the Treasury, SPC President Donald Duval called for a relaxation of the rules governing financial advice. He said: "Regulation is there to protect customers, but laying too many cigarette-packet style warnings on the savings industry is probably putting a large percentage of the population off saving their money, because it introduces a fear factor.

"People should be allowed to make decisions for themselves. Employers and others should be allowed to talk about which savings plans or pensions are likely to be best, and overall there should be less emphasis on the risks and uncertainties."

Duval would also like to see a relaxation of the rules governing the amount of information financial advisers need to glean from clients before advising them. He added: "Having to obtain so much information lengthens the process unnecessarily and over complicates the decision-making process, again putting many potential savers off."