I THINK THE AUTOMATIC ENROLLING INTO PERSONAL ACCOUNTS IS AN EXCELLENT IDEA, BUT I PERSONALLY WOULD NOT GIVE THE CHOICE OF OPTING OUT. THE PEOPLE ON HIGHER INCOMES WILL BE BETTER ABLE TO MANAGE THIS EXTRA DEDUCTION FROM THEIR SALARY AND WELCOME THE BENEFIT THIS WILL GIVE ON RETIREMENT. THE PEOPLE ON LOWER INCOMES HOWEVER(WHO ARE THE PEOPLE WHO WILL NEED MOST HELP AT RETIREMENT) WILL BE THE MOST RELUCTANT TO PAY INTO PERSONAL ACCOUNTS BECAUSE THEY FEEL THEY NEED EVERY PENNY THEY EARN TO SURVIVE IN THE PRESENT TIME. THEY LIVE FOR TODAY AND DO NOT HAVE THE SAME FORESIGHT, AND EXPECT THE STATE TO LOOK AFTER THEM. THESE PEOPLE, GIVEN THE CHOICE, WILL STILL END UP LIVING ON STATE BENEFIT AT RETIREMENT. I THINK THAT IN ORDER FOR THIS TO WORK IT WILL HAVE TO BE COMPULSORY FOR EVERYONE, JUST LIKE INCOME TAX AND NATIONAL INSURANCE. I THINK THE ONLY PLACE FOR CHOICE IS IN THE PERCENTAGE INDIVIDUALS ARE ALLOWED TO SAVE IN THEIR PERSONAL ACCOUNTS, AND THEY SHOULD BE ALLOWED!
TO SAVE MORE IF THEY SO WISH (BUT NOT NECESSARILY MATCHED BY AN INCREASED EMPLOYER OR GOVERNMENT CONTRIBUTION).
I HAVE SLIGHT MISGIVINGS THAT THE EXTRA COST OF THIS TO EMPLOYERS WHO, BECAUSE OF COST, CHOSE NOT TO OPERATE A PENSION SCHEME PREVIOUSLY, MIGHT BE PUT OUT OF BUSINESS BECAUSE OF THIS. ALSO THE EXTRA COST INVOLVED COULD HAVE AN EFFECT ON THE NUMBER OF STAFF THAT COMPANIES ARE ABLE TO EMPLOY, AND COULD ULTIMATELY RESULT IN HIGHER UNEMPLOYMENT.
I FEEL STRONGLY THAT DRASTIC MEASURES NEED TO BE TAKEN TO ADDRESS THIS POTENTIAL FUTURE PENSION CRISIS, BUT THINK THAT EVERYONE NEEDS TO TAKE THE MEASURES, NOT JUST THE ONES WHO CHOOSE TO DO SO.
janet kelly wrote:
my immediate reaction is that unless interest rates are competitive then what is the point of opening another account? The feeling I have is that I would like to control my cash, not another government department and I would take my /with people who are in the commercial field working for a reputable high streeet organisation/bank or broker. I know that may sound quite negative but my age bracket determines my feelings toward retirement, withinreach (God willing) but still further away than it ought to be thanks to government legislation, I wait until 65 before pension is reached and I still hopefully reach retirement age in the Civil Service at 60 thanks to a hue and outcry from the Trade Unions, (ghast) nonthe less I know my views are very mainstream amongst my work colleagues and my friends (all ladies of a certain age)and my attitude towards the risk is very low risk indeed. I do hope this is of some use to wards reaching a fairer conclusion but not one i ! feel comfortable with al all.
Chris Wicks wrote:
Hi there,
A few points on personal accounts...
Affordability for business of mandatory contributions: my dad runs a business of around 6 employees, and estimates that the likely effect of introducing mandatory contributions by employers will be no (or very small) raises that year. After that, the contributions will just be part of the budget. This seems like a fair cost to pay for employers and employees.
Administration: the pensions industry has been pushing hard to be given the job, but I believe that the complexity and inefficiency of contracting out demonstrates that it's not in the best interests of savers and pensioners for this to be done. Better to keep it in HMRC or the DWP - it also makes the ongoing cost targets more achievable.
IT: as an IT consultant currently delivering government projects, I have a good view of the IT and process cost of policy change. Administering Personal Accounts is a big piece of work, but we shouldn't go about it by bunging in a whole new system - the existing NIRS2 system can be enhanced to run contributions and the DWP has a suite of applications which can pay the money out.
Happy to discuss... All the best, Chris
George Weston wrote:
This proposed "personal account", whilst perhaps achieving an aim of making pensions better-funded, is yet another arcane and convoluted financial vehicle mooted by government(like tax credits, Child Support Agency, etc.) which could be similarly doomed to failure should insufficient resources be provided for its effective and efficient administration. I am approaching pension age myself (I am 62 next birthday). I have paid - and continue to pay - national insurance, income tax and employee's pension contributions since I started work at 16 years of age, with no choice of "opting out". It is a pity that successive governments have not had the strength of character and will over the years to ensure that an ongoing audit of pension payments and contributions is carried out, with any "danger signals" caused by demographic changes (up or down) triggering automatic increases/decreases in income tax and/or national insurance, in order to keep an ongoing balance. Additionally, legislation should have been passed - and could still be passed - making company pension schemes "copper-bottomed" and inviolable, with no options available for directors to raid their pension funds, sanction "pension contribution holidays", or to cease or make worse final salary schemes. Had the foregoing happened, we would not be in this mess now. What is!
needed is as follows:
1. Make up the shortfall in Retirement Pension funding by an increase in income tax and/or national insurance - don't bring in yet another funding option such as "personal accounts"! 2. Take into account when calculating 1. above making the Retirement Pension linked to prices. 3. Do away with "age bonuses", income support, winter fuel allowances, etc. and add all these on to the basic Retirement Pension for everyone. 4. Pass legislation requiring companies to fully contribute to their pension schemes at all times, paying them perhaps into an escrow account, where they can't be "got at" for short-term financial reasons - and at the same time protecting employees from their companies' possible future insolvency. 5. Outlaw the cessation of final salary schemes and encourage employers to set up such schemes. In short, adopt the KISS principle - keep it simple, stupid!
Stephen Burke wrote:
Broadly speaking, personal accounts seem like a good idea. However, there is a risk that the eventual pension will be a lot lower than people expect, partly because the proposed contribution level is fairly low and partly because investment returns and/or annuity rates may turn out to be worse than expected. Potentially a future government may be in the position of having to underwrite the scheme if it's seen as having made promises about the outcome.
Ronnie Sloan wrote:
The currently proposed contribution structure is NOT "the best way to get more people saving".
Why should employees who cannot afford to pay 5% lose the benefit of the employer's 3%?
My alternative is for a 2% core contribution from employers only, with no requirement for employees to pay. But employees may pay optionally on top on an age-related scale, with £ for £ matching by employers. This scale would be 2% in the 20s, 3% in the 30s, 4% in the 40s, and 5% at age 50 and above.
This would be much more realistic and flexible to employees, and would be likely to produce a more balanced outcome than the current proposal.
Further details of my proposals, with tables of examples, are available on request.
Ronnie Sloan (consulting actuary)
Jack Crossfield JP
Whilst saving whilst working may be a good idea because the history of incidents that have taken place before, people do not trust the financial institutions and companies to handle their money correctly.
Whilst people may save for many years from their income the value deteriorates of their savings year by year and never gives back the true value that was given at the time by the payee.
It is also about time that Governments start to see what other benefits can be given to the elderly, for example: After paying standing charges for such things as Electric, gas, etc these charges should be either stopped or drastically reduced when reaching retirement age. Most of the senior citizens of the UK have contributed to the vast profits these companies make and should be rewarded for their support (pro-rata).
There is also a need to have area representation of pensioners, who are elected by the pensioners, to sit as an area committees to raise local, regional and national issues to do with the elderly.
Whilst this government have given the indication of free travel to pensioners in 2007 this needs to include all forms of travel in the UK.
Jack Crossfield JP
Stephen Wynn wrote:
An article "Financial services gurus to help balance personal accounts" in the Financial Times, 3rd August, starts: "Top executives from the the global financial services industry are to be recruited to a new body .. ". NPSS will then be run from the point of view of the industry. There is a long history of governments consulting the industry how to reform the industry. Then nothing much happens, because the industry does not want to be reformed.
The industry did not make a success of running personal or stakeholder pensions. So why should it make a success of running NPSS? We seem to be heading towards a new kind of personal pension. If there is a choice of providers, they will then compete for business.
Trevor A J ames wrote:
The combination of later retirement and greater emphasis on retirement savings is undoubtedly the way forward.It is essential that there is a sufficient inducement to save and a robust lock-in based on age.Inducements that would appeal include, employer contributions and tax relief on both deposits and interest accrued after deposit.This would produce a tax free income from a given age.A contribution from the state would ensure maximum take up. Any attempt to link benefits to means testing would be counter productive in the long term.Accrued benefits should be open and transparent and available to all.Pension savings need to be owned by individuals and therefore passed on to their beneficiaries, as further inducement to save.With the appropriate controls lump sum payments into a pension saving fund should be allowed from a benefactor which are free from inheritance tax regulation.This would encourage each generation to fund the pension needs of the next.In conclusion a pension credit should be a viable currency which is only accessable to the individual at the appropriate retirement age and tax free.
catherine smith wrote:
Everyone should save towards retirement with no opt out. I was prevented from accessing a company pension because I was part time.I joined as soon as all staff were able. I moved to the civil service and took only 2 years of pension with me after 18 years of employment in the private sector. As a result I am working beyond retirement age and will still have a small private pension after many years of employment. People who have never saved have a benefit bridge and pay no services or reduced services. Those of us who have been prudent are penalised.
James Purnell responded:
Your group of employees is one of the priorities in the White Paper. Employers would have to automatically enrol employees earning over £5,500, including any part-time employees. Our plan is to do that from the first month of employment. So, that would mean people in your situation would be able to start saving straight away and take their pension with them when they changed jobs.
We did look at making this compulsory. However, we decided that it was important to ask people to exercise personal responsibility. For example, at some points in their lives, people may want to be saving towards a deposit on a house, or towards paying off debt. It will continue to be their choice about whether and how they save. But by having automatic enrolment, we will reduce the likelihood of people not saving because of inertia.
Janet Berry wrote:
I THINK THE AUTOMATIC ENROLLING INTO PERSONAL ACCOUNTS IS AN EXCELLENT IDEA, BUT I PERSONALLY WOULD NOT GIVE THE CHOICE OF OPTING OUT. THE PEOPLE ON HIGHER INCOMES WILL BE BETTER ABLE TO MANAGE THIS EXTRA DEDUCTION FROM THEIR SALARY AND WELCOME THE BENEFIT THIS WILL GIVE ON RETIREMENT. THE PEOPLE ON LOWER INCOMES HOWEVER(WHO ARE THE PEOPLE WHO WILL NEED MOST HELP AT RETIREMENT) WILL BE THE MOST RELUCTANT TO PAY INTO PERSONAL ACCOUNTS BECAUSE THEY FEEL THEY NEED EVERY PENNY THEY EARN TO SURVIVE IN THE PRESENT TIME. THEY LIVE FOR TODAY AND DO NOT HAVE THE SAME FORESIGHT, AND EXPECT THE STATE TO LOOK AFTER THEM. THESE PEOPLE, GIVEN THE CHOICE, WILL STILL END UP LIVING ON STATE BENEFIT AT RETIREMENT. I THINK THAT IN ORDER FOR THIS TO WORK IT WILL HAVE TO BE COMPULSORY FOR EVERYONE, JUST LIKE INCOME TAX AND NATIONAL INSURANCE. I THINK THE ONLY PLACE FOR CHOICE IS IN THE PERCENTAGE INDIVIDUALS ARE ALLOWED TO SAVE IN THEIR PERSONAL ACCOUNTS, AND THEY SHOULD BE ALLOWED!
TO SAVE MORE IF THEY SO WISH (BUT NOT NECESSARILY MATCHED BY AN INCREASED EMPLOYER OR GOVERNMENT CONTRIBUTION).
I HAVE SLIGHT MISGIVINGS THAT THE EXTRA COST OF THIS TO EMPLOYERS WHO, BECAUSE OF COST, CHOSE NOT TO OPERATE A PENSION SCHEME PREVIOUSLY, MIGHT BE PUT OUT OF BUSINESS BECAUSE OF THIS. ALSO THE EXTRA COST INVOLVED COULD HAVE AN EFFECT ON THE NUMBER OF STAFF THAT COMPANIES ARE ABLE TO EMPLOY, AND COULD ULTIMATELY RESULT IN HIGHER UNEMPLOYMENT.
I FEEL STRONGLY THAT DRASTIC MEASURES NEED TO BE TAKEN TO ADDRESS THIS POTENTIAL FUTURE PENSION CRISIS, BUT THINK THAT EVERYONE NEEDS TO TAKE THE MEASURES, NOT JUST THE ONES WHO CHOOSE TO DO SO.
janet kelly wrote:
my immediate reaction is that unless interest rates are competitive then what is the point of opening another account? The feeling I have is that I would like to control my cash, not another government department and I would take my /with people who are in the commercial field working for a reputable high streeet organisation/bank or broker. I know that may sound quite negative but my age bracket determines my feelings toward retirement, withinreach (God willing) but still further away than it ought to be thanks to government legislation, I wait until 65 before pension is reached and I still hopefully reach retirement age in the Civil Service at 60 thanks to a hue and outcry from the Trade Unions, (ghast) nonthe less I know my views are very mainstream amongst my work colleagues and my friends (all ladies of a certain age)and my attitude towards the risk is very low risk indeed. I do hope this is of some use to wards reaching a fairer conclusion but not one i ! feel comfortable with al all.
Chris Wicks wrote:
Hi there,
A few points on personal accounts...
Affordability for business of mandatory contributions: my dad runs a business of around 6 employees, and estimates that the likely effect of introducing mandatory contributions by employers will be no (or very small) raises that year. After that, the contributions will just be part of the budget. This seems like a fair cost to pay for employers and employees.
Administration: the pensions industry has been pushing hard to be given the job, but I believe that the complexity and inefficiency of contracting out demonstrates that it's not in the best interests of savers and pensioners for this to be done. Better to keep it in HMRC or the DWP - it also makes the ongoing cost targets more achievable.
IT: as an IT consultant currently delivering government projects, I have a good view of the IT and process cost of policy change. Administering Personal Accounts is a big piece of work, but we shouldn't go about it by bunging in a whole new system - the existing NIRS2 system can be enhanced to run contributions and the DWP has a suite of applications which can pay the money out.
Happy to discuss...
All the best,
Chris
George Weston wrote:
This proposed "personal account", whilst perhaps achieving an aim of making pensions better-funded, is yet another arcane and convoluted financial vehicle mooted by government(like tax credits, Child Support Agency, etc.) which could be similarly doomed to failure should insufficient resources be provided for its effective and efficient administration. I am approaching pension age myself (I am 62 next birthday). I have paid - and continue to pay - national insurance, income tax and employee's pension contributions since I started work at 16 years of age, with no choice of "opting out". It is a pity that successive governments have not had the strength of character and will over the years to ensure that an ongoing audit of pension payments and contributions is carried out, with any "danger signals" caused by demographic changes (up or down) triggering automatic increases/decreases in income tax and/or national insurance, in order to keep an ongoing balance. Additionally, legislation should have been passed - and could still be passed - making company pension schemes "copper-bottomed" and inviolable, with no options available for directors to raid their pension funds, sanction "pension contribution holidays", or to cease or make worse final salary schemes. Had the foregoing happened, we would not be in this mess now. What is!
needed is as follows:
1. Make up the shortfall in Retirement Pension funding by an increase in income tax and/or national insurance - don't bring in yet another funding option such as "personal accounts"! 2. Take into account when calculating 1. above making the Retirement Pension linked to prices. 3. Do away with "age bonuses", income support, winter fuel allowances, etc. and add all these on to the basic Retirement Pension for everyone. 4. Pass legislation requiring companies to fully contribute to their pension schemes at all times, paying them perhaps into an escrow account, where they can't be "got at" for short-term financial reasons - and at the same time protecting employees from their companies' possible future insolvency. 5. Outlaw the cessation of final salary schemes and encourage employers to set up such schemes. In short, adopt the KISS principle - keep it simple, stupid!
Stephen Burke wrote:
Broadly speaking, personal accounts seem like a good idea. However, there is a risk that the eventual pension will be a lot lower than people expect, partly because the proposed contribution level is fairly low and partly because investment returns and/or annuity rates may turn out to be worse than expected. Potentially a future government may be in the position of having to underwrite the scheme if it's seen as having made promises about the outcome.
Ronnie Sloan wrote:
The currently proposed contribution structure is NOT "the best way to get more people saving".
Why should employees who cannot afford to pay 5% lose the benefit of the employer's 3%?
My alternative is for a 2% core contribution from employers only, with no requirement for employees to pay. But employees may pay optionally on top on an age-related scale, with £ for £ matching by employers. This scale would be 2% in the 20s, 3% in the 30s, 4% in the 40s, and 5% at age 50 and above.
This would be much more realistic and flexible to employees, and would be likely to produce a more balanced outcome than the current proposal.
Further details of my proposals, with tables of examples, are available on request.
Ronnie Sloan (consulting actuary)
Jack Crossfield JP
Whilst saving whilst working may be a good idea because the history of incidents that have taken place before, people do not trust the financial institutions and companies to handle their money correctly.
Whilst people may save for many years from their income the value deteriorates of their savings year by year and never gives back the true value that was given at the time by the payee.
It is also about time that Governments start to see what other benefits can be given to the elderly, for example: After paying standing charges for such things as Electric, gas, etc these charges should be either stopped or drastically reduced when reaching retirement age. Most of the senior citizens of the UK have contributed to the vast profits these companies make and should be rewarded for their support (pro-rata).
There is also a need to have area representation of pensioners, who are elected by the pensioners, to sit as an area committees to raise local, regional and national issues to do with the elderly.
Whilst this government have given the indication of free travel to pensioners in 2007 this needs to include all forms of travel in the UK.
Jack Crossfield JP
Stephen Wynn wrote:
An article "Financial services gurus to help balance personal accounts" in the Financial Times, 3rd August, starts: "Top executives from the the global financial services industry are to be recruited to a new body .. ". NPSS will then be run from the point of view of the industry. There is a long history of governments consulting the industry how to reform the industry. Then nothing much happens, because the industry does not want to be reformed.
The industry did not make a success of running personal or stakeholder pensions. So why should it make a success of running NPSS? We seem to be heading towards a new kind of personal pension. If there is a choice of providers, they will then compete for business.
Trevor A J ames wrote:
The combination of later retirement and greater emphasis on retirement savings is undoubtedly the way forward.It is essential that there is a sufficient inducement to save and a robust lock-in based on age.Inducements that would appeal include, employer contributions and tax relief on both deposits and interest accrued after deposit.This would produce a tax free income from a given age.A contribution from the state would ensure maximum take up. Any attempt to link benefits to means testing would be counter productive in the long term.Accrued benefits should be open and transparent and available to all.Pension savings need to be owned by individuals and therefore passed on to their beneficiaries, as further inducement to save.With the appropriate controls lump sum payments into a pension saving fund should be allowed from a benefactor which are free from inheritance tax regulation.This would encourage each generation to fund the pension needs of the next.In conclusion a pension credit should be a viable currency which is only accessable to the individual at the appropriate retirement age and tax free.
catherine smith wrote:
Everyone should save towards retirement with no opt out. I was prevented from accessing a company pension because I was part time.I joined as soon as all staff were able. I moved to the civil service and took only 2 years of pension with me after 18 years of employment in the private sector. As a result I am working beyond retirement age and will still have a small private pension after many years of employment. People who have never saved have a benefit bridge and pay no services or reduced services. Those of us who have been prudent are penalised.