| Pensions paper: "Xmas could be late for some schemes" - NAPF |
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| 19/12/2002 | |
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The new proposals for pensions and tax reform are a positive step forward, but may come too late for some pension schemes and their members, according to the National Association of Pension Funds (NAPF). Commenting on the government's green paper – Simplicity, Security and Choice: Working and saving for retirement – NAPF chief executive, Christine Farnish, said: "The government has clearly listened, and we welcome this. The tax review makes a number of radical proposals which may make it easier for firms to retain their pension schemes, and offers the genuine prospect of some employers being able to offer schemes where there currently are none." NAPF – representing the members of the £900bn pension fund industry – particularly welcomed proposals for: · Greatly simplified tax rules · Measures to support flexible retirement · Progress on replacement of the Minimum Funding Requirement, and · A new, more risk-based, regulatory regime Farnish added: "Having listened, however, the government must now act. One outstanding question mark hangs over the timing of these changes. The tax proposals involve a four-month consultation process – which means no change for at least another 16 months. For many pension schemes and their members, this would be like getting your Christmas presents on Boxing Day." ABI: "Useful but not thorough" The Association of British Insurers (ABI), whose members (along with those of NAPF) own around half of companies in the FTSE 100, was less enthusiastic than its pension fund brethren. Mary Francis, director general of the ABI, said: "The government needed to breathe life into its pensions strategy. Today's proposals contain some useful elements but we doubt that they will fully bridge the savings gap". Francis continued: "The green paper proposes some welcome changes: a radically simpler tax regime and simpler pensions will undoubtedly help remove some of the barriers to saving; so too will ensuring that people know more about their need to save for retirement; and we are pleased that the Government has recognised the need for flexibility in retirement. We agree with this voluntarist approach." The government's green paper is designed to boost choice in pensions, as well as incentives to encourage older workers to remain in employment. Pensions consultant Hewitt Bacon & Woodrow says that the Inland Revenue tax moves are very positive, but warns that overall the changes do not do enough to encourage individuals to save. What the government says Work and Pensions Secretary Andrew Smith said: "The pensions system in Britain has historically been a labyrinth of complexity. For most people pension planning is an incomprehensible maze. At least 3 million people are not saving enough for their retirement." "All the partners in the pensions partnership - Government, employers, employees and financial services - must rise to the challenge of strengthening the voluntarist approach." The paper also considers allowing schemes to make pension membership a condition of employment. It will encourage pensions information being added to pay slips and recruitment material. Employees must be consulted before pension schemes are changed, the paper proposes. And an employer-led task force - including trade union membership - will be set up to identify and promote good practice. Trustees get new measures Other measures include reforming the Minimum Funding Requirement and allowing trustees to invest more appropriately given the characteristics of their own particular membership. Trustees will have to set out a Statement of Funding Principles based on actuarial advice and negotiated with the employer. If agreement cannot be reached with the employer the Trustees would have overriding powers to freeze or wind up the scheme. Ratings agency Standard & Poor's said this approach would require a much more explicit balancing of the maturity of the fund, future asset allocations and investment yields, the current deficit, and the employer's ability to meet the funding requirement. "The credit strength of the employer and implicitly the DB fund itself, through the mechanism of the Statement of Funding Principles, will become more visible and important. Trustees and their advisors will need to consider much more actively the consequences of asset class and yield assumptions, the rate at which any deficit must be eliminated and the adequacy of the funding rate," S&P said. This e-mail address is being protected from spam bots, you need JavaScript enabled to view it |
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