UK - The government is looking at new tax rules that would lead to more clarity and less cost on pensions, according to pensions minister Stephen Timms.
Timms told delegates at the Society of Pensions Consultants’ annual conference that pensions have reached a “critical juncture”, with some 3 million people “seriously” under providing for their pensions and a further 10 million needing to do more to ensure an adequate income in retirement.
Ros Altmann, independent policy advisor, said reform was essential in order to stop state pensions undermining private pensions. “At some point in the future, we must recognise that we have promised too much. We have to get real, as there are many tough decisions to be made,” she said.
Tim Chessells, Hermes non-executive director, said in his own opinion compulsion was “regrettably” necessary. Chessells went on to say it was “absolutely shocking” that long term public sector pension costs would fall on the taxpayer.
With the pensions report due on November 30, Timms said expanding the number of people saving would be the key first step, and at the heart of what the commission would address.
Timms also hinted that the Pensions Commission would remain past the final report, albeit in a different form: “What may well be suggested is some sort of enduring institution to look at some of the specific areas. But the Commission as it is currently constituted is final, there will be no more reports,” he said.
Meanwhile, millions of final salary pension scheme members could miss out on the opportunity to get a bigger pension due to overly protective legislation, according to new figures from Aon Consulting.
Aon claimed that, as increasing numbers of final salary pension schemes close and wind up, existing practice and legislation would make it inevitable that the vast majority of members end up having their benefits bought out with an insurance company.
This is because the law insists this be the default route for trustees unless members decided otherwise, and as few members understand the issues, most end up being bought out.
However, figures from Aon show this may not be in the best interests of many members and could end up costing them thousands of pounds worth of future annual pension income.
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