Article date: 18 December 2002
Norwich Union welcomes the simplification measures put forwardin yesterday's Pensions Green Paper and the measures to extendworking lives.
However, we believe that further measures will be required if weare going to encourage individuals and employers to contribute moreto private pensions in sufficient numbers to help narrow thesavings gap in the UK.
There is no doubt that radical simplification of pensions isdesperately needed, and the Government has recognised the need tocut through the current complex rules and simplify thingsdramatically. That is good news.
We have to make it easy for people to start saving into apension, and to continue saving into it, in a way that suits theirchanging circumstances. Therefore, the Government's bold step intaking an axe to the eight existing pension tax regimes, to createone single regime, is to be applauded. This should also make iteasier for people to contribute to more than one pension at thesame time, which is a significant step forward.
In simplifying the tax rules, and cutting out some of the redtape, the Government is trying to make it easier for employers toprovide a straightforward company pension scheme for theirworkforce. This makes sense, as the workplace is key in encouragingpeople to save more towards their retirement. It is in theworkplace that most people who are currently under-pensioned, butwho could afford to save more, are to be found.
New, tailored communications with consumers to explain the risks ofnot saving enough for their retirement is a good idea. It iscritical that people understand how important it is to save fortheir retirement and appreciate the need to take personalresponsibility in doing so.
We believe that the introduction of value-protected annuities is akey step towards providing money back annuities. Consumer research,which we passed to the Government in the summer, showed veryclearly that people firmly believe money back annuities wouldrepresent a better deal for them and would make them betterdisposed to saving via a pension.
The value protected annuities proposed in the Green Paper onlyprovide a money back guarantee on death before age 75. We willcontinue to call for money-back annuities without thisconstraint.
Pricing of simple products
We welcome the Government's encouragement of private sectorinvolvement, but for the market to work effectively, it isimportant that the pricing framework doesn’t get in the wayof making the Government's creative re-structuring of the taxregime a real success for savers.
The Government must allow the private sector to play a much moreactive role in encouraging those most in need to start saving fortheir retirement - this is only possible through introducing moreflexibility around the price cap. Without this, however good theintentions of legislators, the result will be that the market willnot operate to stimulate savings amongst those that really need tosave. If it is not economically viable for employers and pensionproviders to promote and distribute "simple" products, likestakeholder pensions, then the Government's objectives could bethwarted.
Reform of state pensions
We would have liked to see the Government announce a thoroughreview of state pensions. Currently the interaction of statebenefits and private pensions is complicated. People need to betterunderstand what state pension they will get and have confidencethat any private pension will then pay out on top of this. It wouldthen be easier to demonstrate to people the clear benefit in savingvia a private pension. We are concerned that the Government'scontinued commitment to means-tested state benefits will mean thatfor many lower earners, there will remain a disincentive to saveinto a private pension.
Commenting, Philip Scott, executive chairman of Norwich UnionLife, said: "We recognise that the changes in the pensions taxsystem are radical and will remove lots of the complexity aroundpensions. However, we believe that further measures are required toensure that people understand the need to save for retirement andare encouraged and incentivised to do so.
"We are pleased to see that the Government has acknowledged theconcerns raised by the industry about the economics of a flat 1%charge on Sandler's new suite of "simple" products, and that itwill be consulting with the industry and consumer bodies on thissubject early in the New Year."
Press office contacts:
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|Ian Beggs||Norwich Union Life||08703 66 68 71||07790 487533|
|LouiseGoffeee||Norwich Union Life||08703 66 68 70||07810 057362|
Notes to Editors
Norwich Union is the UK’s largest insurer. It is theUK’s largest provider of life, pensions and investmentproducts and one of the leading IFA providers. IFAs provide around75% of the company’s long-term savings business.
Norwich Union has strategic alliances with building societiesand other leading UK brand names including Tesco Personal Financeand The Royal Bank of Scotland Group.
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