ABI warns tax cut plans will reduce pension incentives

Speaking at the Global Financial Leadership Forum in New York yesterday, director general Stephen Haddrill told delegates that, having been on a "binge of debt", every penny was going into reducing individual's loans - not saving more for old age.

He said: "Perhaps in time the picture will change, but with average household debt at 170pc of average household income - that will take time."

Haddrill explained the government had no immediate answer to this, and claimed the plan to reduce tax rate for lower incomes would cut down the tax incentive to save in a pension pot and could make the problem worse.

He said: "The government has agreed that after 2012, employers with existing good insurance-based pension schemes should also automatically enroll. We are now calling on them to allow that immediately to boost saving.

"We are also urging them to mount a major campaign to explain the need to save for retirement."

The trade body also confirmed it was acting to boost confidence in pensions and savings by calling on the pensions regulator to improve the quality of sales intermediaries, including agents or independent advisers.

Haddrill added: "We wish to see adviser commission and the bias it causes in sales eliminated. We also want to see higher professional standards in the advice giving industry.

"Poor experience of advice has damaged confidence for too long. And commissions have encouraged too much churning of investments."

Haddrill added: "In the UK and across Europe we have a hard road ahead. The pensions market is an innovative place in the UK but is not well supplied by its raw material - savings."