Norwich Union welcomes the simplification measures put forward in yesterday's Pensions Green Paper and the measures to extend working lives.
Norwich Union welcomes the simplification measures put forward in yesterday's Pensions Green Paper and the measures to extend working lives.
However, we believe that further measures will be required if we are going to encourage individuals and employers to contribute more to private pensions in sufficient numbers to help narrow the savings gap in the UK.
Simplification
There is no doubt that radical simplification of pensions is desperately needed, and the Government has recognised the need to cut through the current complex rules and simplify things dramatically. That is good news.
We have to make it easy for people to start saving into a pension, and to continue saving into it, in a way that suits their changing circumstances. Therefore, the Government's bold step in taking an axe to the eight existing pension tax regimes, to create one single regime, is to be applauded. This should also make it easier for people to contribute to more than one pension at the same time, which is a significant step forward.
In simplifying the tax rules, and cutting out some of the red tape, the Government is trying to make it easier for employers to provide a straightforward company pension scheme for their workforce. This makes sense, as the workplace is key in encouraging people to save more towards their retirement. It is in the workplace that most people who are currently under-pensioned, but who could afford to save more, are to be found.
Improved communications
New, tailored communications with consumers to explain the risks of not saving enough for their retirement is a good idea. It is critical that people understand how important it is to save for their retirement and appreciate the need to take personal responsibility in doing so.
Modernising annuities
We believe that the introduction of value-protected annuities is a key step towards providing money back annuities. Consumer research, which we passed to the Government in the summer, showed very clearly that people firmly believe money back annuities would represent a better deal for them and would make them better disposed to saving via a pension.
The value protected annuities proposed in the Green Paper only provide a money back guarantee on death before age 75. We will continue to call for money-back annuities without this constraint.
Pricing of simple products
We welcome the Government's encouragement of private sector involvement, but for the market to work effectively, it is important that the pricing framework doesn’t get in the way of making the Government's creative re-structuring of the tax regime a real success for savers.
The Government must allow the private sector to play a much more active role in encouraging those most in need to start saving for their retirement - this is only possible through introducing more flexibility around the price cap. Without this, however good the intentions of legislators, the result will be that the market will not operate to stimulate savings amongst those that really need to save. If it is not economically viable for employers and pension providers to promote and distribute "simple" products, like stakeholder pensions, then the Government's objectives could be thwarted.
Reform of state pensions
We would have liked to see the Government announce a thorough review of state pensions. Currently the interaction of state benefits and private pensions is complicated. People need to better understand what state pension they will get and have confidence that any private pension will then pay out on top of this. It would then be easier to demonstrate to people the clear benefit in saving via a private pension. We are concerned that the Government's continued commitment to means-tested state benefits will mean that for many lower earners, there will remain a disincentive to save into a private pension.
Commenting, Philip Scott, executive chairman of Norwich Union Life, said: "We recognise that the changes in the pensions tax system are radical and will remove lots of the complexity around pensions. However, we believe that further measures are required to ensure that people understand the need to save for retirement and are encouraged and incentivised to do so.
"We are pleased to see that the Government has acknowledged the concerns raised by the industry about the economics of a flat 1% charge on Sandler's new suite of "simple" products, and that it will be consulting with the industry and consumer bodies on this subject early in the New Year."
Ends
Press office contacts:
| James Evans | Norwich Union Life | 08703 66 68 78 | 07790 487105 | ||
| Ian Beggs | Norwich Union Life | 08703 66 68 71 | 07790 487533 | ||
| Louise Goffeee | Norwich Union Life | 08703 66 68 70 | 07810 057362 |
Notes to Editors
Norwich Union is the UK’s largest insurer. It is the UK’s largest provider of life, pensions and investment products and one of the leading IFA providers. IFAs provide around 75% of the company’s long-term savings business.
Norwich Union has strategic alliances with building societies and other leading UK brand names including Tesco Personal Finance and The Royal Bank of Scotland Group.
- Norwich Union’s news releases are available on the Aviva plc
website at www.aviva.com - A selection of images is available from the Norwich Union
Newscast site at www.newscast.co.uk
| Life and pension media enquiries call | 08703 66 68 73 |
| For all other media enquiries call | 08703 66 68 68 |
Members of the Aviva group