3 February 2004 - Putting people in control of their retirement planning
Radical plans to help people take control of their retirement planning, including regular “pension health check-ups”, were unveiled by Andrew Smith Secretary of State for Work and Pensions, with the publication of ‘Simplicity, security and choice: Informed choices for working and saving’.
Andrew Smith said:
“The state of your pension should be as important as the state of your health - we want to provide people with the tools to make informed choices about their future”
At the core of the plans is an online retirement planner which will be used to give individuals a clear overall picture of their retirement prospects, based on personalised information about both their state pension and any private provision. The planner will help individuals to find out how working longer or saving more can help any saving shortfall.
Andrew Smith continued:
“The decisions people make about retirement are among the most important they face. We all get a lot of information on pensions, but too often we don’t understand how it relates to our own retirement prospects. Government must help provide people with trustworthy, individually-tailored information that simply explains their situation and the options available to them.”
Andrew Smith together with Pensions Minister Malcolm Wicks set out a series of initiatives that the Government, working in partnership with employers, individuals, the financial services industry, trade unions and the voluntary sector will take to tackle this problem.
Making the most of pension provision – Often people do not join their company pension scheme when they start a new job, which can leave them under-providing for retirement. Working with partners the Government will explore and develop three different approaches to reduce this risk:
- active decisions: where new employees are required to make a decision whether or not to join a company’s scheme;
- commitment to save more in the future: where employees commit potential future earnings to their pensions savings; and
- automatic enrolment: where new employees become members of their employers’ pension scheme but retain the option to opt-out
Raising awareness and education – Pensions are complex, people need the right skills and tools to understand the choices. People can only respond to trustworthy information if they have been properly equipped to interpret it. So we will:
- strengthen personal finance in the National Curriculum;
- provide support and reform regulations to make it easier for firms to get on with promoting good schemes; and
- take powers to oblige firms that don’t offer their own pension to provide a decent standard of pensions information.
Giving people the right information – People need clear information, tailored to their own circumstances, in order to make informed choices. So we will:
- Massively increase the number of state pension forecasts sent out, so that by 2005/06 9.1 million people receive them;
- Work in partnership with employers to deliver 3 million combined pension forecasts by 2005/06 so more people can see the total income from state and company pensions schemes that they are on course for; and
- Develop the web-based retirement planner to give people a more complete picture of their personal prospects and options.
Andrew Smith added:
“I have met with many employees and employers who have said that it is the quality and relevance of information that is crucial in allowing them to take key decisions about their pension. I believe that through this package of measures we will have taken a major step towards changing people’s attitudes towards their pension and helping them plan properly for their retirement.”
Minister for Pensions Malcolm Wicks said the argument for the Informed Choice agenda had never been stronger:
“As we all know, we are living longer and this makes it more important than ever that people make the right decision to ensure they have the retirement they have dreamt of. Informed Choice will do this right across the workplace.”
Notes for editors
- Informed choice is one of the key elements of the Government’s overall pensions strategy as set out in the 2002 Pensions Green Paper – Simplicity, security and choice: Working and saving for retirement – which has since been developed in extensive consultation. The strategy also involves various other plans where developments are already in train:
- Proposals for radical simplification of tax rules, (replacing 8 tax regimes with a single system)
- Measures to open up new options to extend working lives
- Measures included in Simplicity, security and choice: Working and saving for retirement – Action on occupational pensions – to protect members of pension schemes and make it easier for companies to run the schemes to be taken forward in the forthcoming Pensions Bill.
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