New plan to insure pension savings

UK Political Editor

Tuesday 10 July 2012

WORKERS are to be allowed to protect their pensions by insuring savings against stock market falls under new plans by the UK Government.

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MICHAEL SETTLE UK POLITICAL EDITOR

Steve Webb, the Pensions Minister, has urged industry experts to exploit the gap in the market for innovative pension products, which might include some form of cost-efficient guarantee and offer people a greater degree of certainty on what their pension income could be on retirement.

"I am convinced people have a huge appetite for certainty about their pension savings, and this demand will drive the shape of pension provision in the future," said Mr Webb."I want industry to innovate and think hard about this. With the dawn of automatic enrolment, the market is growing, so now is the time for the pensions industry to look at the market gap in relation to affordable guarantees and provide the products consumers are seeking," he added.It is estimated the average Briton saves almost £300 a month in a workplace pension, made up of personal and employer contributions as well as tax relief from the Treasury. Under the plan, workers would pay a levy on contributions of 0.75%, or about £30 a year. The policy, provided by private companies, would guarantee savers their pension pot on retirement was worth at least the combined value of their contributions, their employers' contributions and the tax relief they received over their working lives. The Coalition's move has been prompted by fears that, unless pensioners can be guaranteed their money is safe, they will simply be deterred from saving. The squeeze on household incomes in the light of the recession has also put people off saving into a pension.Earlier this year, official figures showed the proportion of people in a workplace pension has fallen below half for the first time in at least 15 years.Just 48% of employees were in a scheme, compared with 55% when the records began in 1997, Office for National Statistics figures revealed.A study by the National Association of Pension Funds found more than half of workers, some 54%, were not confident in pensions, compared with other ways of saving.From October, the Government will launch an initiative to tackle the pension savings crisis with the automatic enrolment of between nine and 10 million people into pension schemes.

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New plan to insure pension savings

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