Initial Comments on Pensions Green Paper – Ros Altmann

    Ros is a leading authority on both private and state pensions,annuities and
    retirement policy. Numerous major awards have recognised her work to
    demystify finance and make pensions work better for people.

  • Ros Altmann

    Ros Altmann

    Initial Comments on Pensions Green Paper

    Initial Comments on Pensions Green Paper


    Comments on Pensions Green Paper

    by Dr. Ros Altmann

    (All material on this page is subject to copyright and must not be reproduced without the author’s permission.)


    recently published Green Paper on pensions reform contains many

    proposals.  The document is produced by the Department for Work

    and Pensions.  The proposals relating to ‘Work’ are

    extremely valuable, but the proposals relating to ‘Pensions’

    are, sadly, wholly inadequate.  There is little in the

    Paper’s proposals that will address the real crisis of confidence

    in our pensions system.  No new incentives are proposed which

    would encourage basic rate taxpayers to put money into pensions, if

    they were not doing so before.  In addition, the State pension

    system has not been addressed at all, and the operation of the State

    system undermines the private system.  As long as there is

    means testing which spreads to most of the pensioner population, the

    incentive to put money into pensions will be lacking.  Pensions

    are no longer suitable for most people (unless they pay higher rate

    tax or have substantial sources of other income).  However

    cheap and simple the pension system becomes, if pensions are not

    suitable, they are not suitable.


    Green Paper does contain some useful proposals, but there are many

    disappointments.  Some of the most important are listed below: 


    Points 0f Pensions Green Paper 


    of flexible and gradual retirement 


    tax regime for pensions 


    of ‘trivial commutation limit’ to £10,000 


    to consult employees before making changes to pension schemes 




    self-employed into the State scheme 


    0f Pensions Green Paper 


    increased protection or compensation for those whose pension rights

    were not protected by legislation, even though the Green Paper

    states that the purpose of pensions law is to protect pensions –

    ‘legislation is there for a reason – to protect the pension

    rights of members’ (p.54)! 


    on words – short on action.  Measures are required to improve

    confidence now. 


    paper has not come to grips with the urgent need to manage the

    change from a primarily DB system, to one which is primarily DC. 

    We have reached a watershed period in pension provision in the UK at

    the start of the 21st Century and the old model is breaking down. 

    In order for DC to be a success, the issues of contributions,

    investment profiles and annuities needed to be tackled, but have not



    new incentives for pension contributions by or for target group of

    middle earners. 


    is no recognition of the need to structure dedicated DC investment

    products, suitable for different types of people, different age

    groups, risk profiles etc.



    consulting on annuities – we’ve just done this. 


    changes to state system, pension credit to remain and S2P not to be

    joined with BSP.  Just because we are forecasting that the

    public cost of providing pensions will remain low up to 2050, does

    not mean all is well.  Given a substantial increase in the

    proportion of elderly to younger people, this simply implies that

    either the burden of providing adequate pensions is being

    transferred from State to employer (or private individuals) and/or

    that increasing numbers will be living on very low incomes. 

    Both of these outcomes have significant negative implications for

    economic growth in future.  This issue needs to be recognised

    and tackled.  Corporate Britain cannot afford to underwrite

    long-term pension liabilities which are being met by the State in

    other European countries.  The profitability of our firms will

    suffer significantly and our industrial competitiveness will be



    of contracting out, with no real explanation of why the complexity

    it entails is worthwhile. 


    to pensions are mainly ‘supply side’ oriented, rather than

    tackling ‘demand side’ issues ie. just giving people information

    and simple products will not increase pension contributions unless

    people actually want to engage in the process in the first place,

    which they currently don’t. 


    initiatives to ensure advice is more widely available e.g.

    encouragement of specialist and basic level of advice and incentives

    for employers to offer access to independent advice. 


    recognition of the fact that, if policy tries to make it cheaper for

    employers to provide pensions, then the pensions provided will be



    paper suggests reductions in contribution rates of 20%, 30% and

    more, with equanimity. 


    call for the financial services industry itself to simplify its own

    processes, procedures, terminology, application forms and so on. 

    Customers find all the jargon so confusing.


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