Peter Thompson, the new chairman of UK's National Association of Pension Funds (NAPF), has created a storm within the pensions industry by claiming that it does not matter whether individuals save for retirement through a pension vehicle or not.
He told International Pensions News that there is a “fine balance” between non-contributory employer plans - such as many new employer stakeholder schemes - and ISAs (Individual Savings Accounts).
His comments to IPN today followed remarks made yesterday (see earlier story) in which Thompson said that individuals may have to postpone retirement in order for financial security.
In his first official day as NAPF chairman, Thompson has sparked heated industry debate that the pensions industry may be left out in the cold as individuals seek other investments to provide for retirement.
“Why should an individual pay into a pension when the leaders of the profession are saying that it will provide an inadequate level of income at the retirement date,” said Graham Brown, pensions and occupational health manager for Barnado Staff Pension Scheme.
“Many people are shareholders and property owners so have other income sources. This is looking at pensions as the sole source of retirement income. Pensions are only one aspect of planning for retirement. Individuals will make up their own minds in planning to meet their retirement needs,” added Brown.
“It is not the pensions industry that provides the income. We are a vehicle for peoples’ saving for retirement. The point is that if people are planning to retire at 65 when interest rates are very low and when peoples’ expectations of early retirement keep on increasing then they ought to be saving more. On a macro scale it does not actually matter whether they do that through a pension vehicle or some other savings vehicle,” Thompson told IPN.
He explained that although contributions paid into defined benefit schemes were fixed until employee retirement age of 65, defined contribution schemes will suffer because of the “longevity revolution”.
“Employees involved in defined contribution schemes may have to give thought to increasing their contributions or working past the age of 65”, he said.
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