I haven't actually noticed too many statements on how the pensions white paper will serve the needs of younger people. Clearly, with the onset of the personal accounts from age 22 a large number of younger people will benefit from better access to workplace pension provision. However, the young are likely to opt-out in greater numbers given they are more likely to be lower-paid work; maybe have higher debts reletive to their income; they might combine p-t work with study etc
What work will the department be doing to examine these issues and more broadly how to communicate the benefits of long-term savings to younger people. I'm doing a fair bit of research with my own clients in this area and would be keen to know how DWP thinking is progressing.
If there is anything to report do feel free to drop me a line. If there's anyone at the Department you think it would be worth having a chat with, feel free to forward my email on.
James Purnell responded:
This is a very good point. I sometimes think we should have given the White Paper a title that emphasised that the core target of our policy is younger workers. They are the group who are saving least, and are most in danger of ending up in retirement with a much lower income than they would have expected.
I made a speech on this at the IPPR, which you may be interested in reading. I think IPPR are going to be doing some research on this area, and on developing policy around saving by younger groups. You may want to contact IPPR through their website.
We are also thinking about this area, under two main headings (1) What can be done to support saving between now and 2012 (2) how do we launch personal accounts effectively. On the second point, some young people may want to opt out initially. But it's worth noting that they would be re-enrolled every three years.
If you have any views on this area, please submit them to our consultation.
Brian Havard wrote:
I support entirely the views of James Nelson, President of the British
Australian Pensioner Association Inc., in his
submission to the DWP Select Committee, see especially para 34 et seq on the
Contributory Principle.
But of far greater significance is the urgent need of correction of the
gross inequity by which half the expatriate pensioners are denied annual
uprating, see paras 54 to 85.
Brian Havard
80 year old WWII Veteran
Frozen pensioner
being shortchanged by 45% of what he paid for in contributions to the
UK Pension Fund
James Purnell responded:
I accept that people have strong opinions on this matter – it's
an issue that has been raised with many governments. But the policy is
also one of long standing approach shared between different governments.
Current estimates show that it would cost around £400 million a
year fully to unfreeze the State Pensions paid to UK pensioners overseas
to bring them up to the rate paid to State Pensioners living in the UK.
Obviously this cost would be higher in the future under our proposals
to up-rate the basic pension in line with average earnings growth in
the UK.
Alexander Leitch wrote:
James, I think on balance I would support the Personal
Account idea but I have some reservations. 1. There may be an incentive for
employers to opt for
this as Cheaper than Defined Benefit or Money plans. 2. It is only supportable
long term if people who don't work or save are not receiving means tested
benefits which out strip the basicpersonal account + Old Age pension. 3.
Trustee control must not be unbalanced such that companies can ride rough
shod over the employee memers. Some control needs to be taken over existing
pension plans to prevent companies changing their commitment to those already
retired, especially with this cheaper alternative being the statndard.
Simon Baggott wrote:
In view of the Pensions Credit, the Government lays itself open to an accusation
of the most appalling mis-selling in history if it proceeds to enforce an
obligatory "employee opt out" scheme. Inertia directs that many
low earners not now saving will find they have have had their pay docked
for absolutely no benefit, their meagre pensions merely deisentitling them
to £30 per week Pensions Credit. If the Government faces damning criticism
now for its bland mis-selling of the "guaranteed safety" of Company
Pensions, this will be nothing compared to what is to come.
FRED CARTER wrote:
I am outraged that I will have to pay for yet another state pension, seeing
as how due to the increasing numbers of old people I probably will not get
the first state pension I am already paying for.
JUST HOW MANY TIMES ARE YOU GOING TO ASK US TO PAY FOR OUR PENSION?
Michael Hague wrote:
The nature of this point illustrates some flawed thinking. The belief that
people will save for retirement if we can just find the right vehicle for
them is fundamentally flawed.
Instead of trying to treat a symptom by improving the savings vehicle, why
not address the root cause? People are subject to advertising all the time
which tells them to buy this or buy that. They are even told that getting into
debt in order to do it is not a problem - help is always at hand. Curtail the
spending so that people need less to live on. They will need less to retire
on and they will have the money to save towards it.
People don't save because they prefer/need to spend their income as and when
they get it. You can have the lowest cost, best performing most flexible savings
vehicle imaginable, backed by tax relief and people will still prefer/need
to spend the money now. You can't send the children to school wearing a pension
plan. You can't go on holiday in a pension plan.
Forcing employers to contribute assumes that there is some money not being
used for other things that can be put in the plan for employees. Increasing
the payroll cost by as little as 3% can only be achieved in many cases by forgoing
pay increases or other moves to offset the cost. Some businesses have the ability
to pay but a Personal Account does not automatically create the money to put
into it.
Then a personal account, company scheme or whatever becomes worth developing.
Vicky Purchase wrote:
There should not be any choice to opt out of the scheme. It should be compulsory
to either have a company scheme or this scheme.
Richard O'Brien wrote:
Does anyone in government believe that employers and employees in companies
with say 10 or more employees should compelled to contribute to a pension
scheme whether it is the employers own or some form of state run or provided
by a nominated pension provider, this at a time when increasing numbers of
employers are closing good final salary schemes and replacing them with cheaper
alternatives and invariably employers are paying less into money purchase
schemes.
Jack Bye wrote:
I do not think people should be able to opt out of saving for their pension.
Everyone should have annual (minimum) statements showing how much they would
receive if they retired a) at the end of the year, b) at, say, 60 and c)
at current standard retirement age. Future estimates would have to be based
on present day values. Women with children under five years old and not
employed should be awarded credits as if they were employed.
Winston Lewis wrote:
Personal Accounts, this is a very good idea because people are automatically
enrolled, they should not be allowed to opted out irrespective of earnings,
if they do opted out we will be right back to where we are now. Individual
accounts can be publish annually to see exactly how the investment is proceeding.
The account should be made flexable allowing the individual to put more into
the account and also attract income tax on that additional amount. I think
that this government is doing some wonderful things regarding pensions, but
they should be more bold and stop allowing people to opt out of personal
account.
Mark Twigg wrote:
I haven't actually noticed too many statements on how the pensions white paper will serve the needs of younger people. Clearly, with the onset of the personal accounts from age 22 a large number of younger people will benefit from better access to workplace pension provision. However, the young are likely to opt-out in greater numbers given they are more likely to be lower-paid work; maybe have higher debts reletive to their income; they might combine p-t work with study etc
What work will the department be doing to examine these issues and more broadly how to communicate the benefits of long-term savings to younger people. I'm doing a fair bit of research with my own clients in this area and would be keen to know how DWP thinking is progressing.
If there is anything to report do feel free to drop me a line. If there's anyone at the Department you think it would be worth having a chat with, feel free to forward my email on.
Brian Havard wrote:
I support entirely the views of James Nelson, President of the British Australian Pensioner Association Inc., in his submission to the DWP Select Committee, see especially para 34 et seq on the Contributory Principle.
But of far greater significance is the urgent need of correction of the gross inequity by which half the expatriate pensioners are denied annual uprating, see paras 54 to 85.
Brian Havard
80 year old WWII Veteran
Frozen pensioner
being shortchanged by 45% of what he paid for in contributions to the UK Pension Fund
Alexander Leitch wrote:
James, I think on balance I would support the Personal Account idea but I have some reservations. 1. There may be an incentive for employers to opt for this as Cheaper than Defined Benefit or Money plans. 2. It is only supportable long term if people who don't work or save are not receiving means tested benefits which out strip the basicpersonal account + Old Age pension. 3. Trustee control must not be unbalanced such that companies can ride rough shod over the employee memers. Some control needs to be taken over existing pension plans to prevent companies changing their commitment to those already retired, especially with this cheaper alternative being the statndard.
Simon Baggott wrote:
In view of the Pensions Credit, the Government lays itself open to an accusation of the most appalling mis-selling in history if it proceeds to enforce an obligatory "employee opt out" scheme. Inertia directs that many low earners not now saving will find they have have had their pay docked for absolutely no benefit, their meagre pensions merely deisentitling them to £30 per week Pensions Credit. If the Government faces damning criticism now for its bland mis-selling of the "guaranteed safety" of Company Pensions, this will be nothing compared to what is to come.
FRED CARTER wrote:
I am outraged that I will have to pay for yet another state pension, seeing as how due to the increasing numbers of old people I probably will not get the first state pension I am already paying for.
JUST HOW MANY TIMES ARE YOU GOING TO ASK US TO PAY FOR OUR PENSION?
Michael Hague wrote:
The nature of this point illustrates some flawed thinking. The belief that people will save for retirement if we can just find the right vehicle for them is fundamentally flawed.
Instead of trying to treat a symptom by improving the savings vehicle, why not address the root cause? People are subject to advertising all the time which tells them to buy this or buy that. They are even told that getting into debt in order to do it is not a problem - help is always at hand. Curtail the spending so that people need less to live on. They will need less to retire on and they will have the money to save towards it.
People don't save because they prefer/need to spend their income as and when they get it. You can have the lowest cost, best performing most flexible savings vehicle imaginable, backed by tax relief and people will still prefer/need to spend the money now. You can't send the children to school wearing a pension plan. You can't go on holiday in a pension plan.
Forcing employers to contribute assumes that there is some money not being used for other things that can be put in the plan for employees. Increasing the payroll cost by as little as 3% can only be achieved in many cases by forgoing pay increases or other moves to offset the cost. Some businesses have the ability to pay but a Personal Account does not automatically create the money to put into it.
Then a personal account, company scheme or whatever becomes worth developing.
Vicky Purchase wrote:
There should not be any choice to opt out of the scheme. It should be compulsory to either have a company scheme or this scheme.
Richard O'Brien wrote:
Does anyone in government believe that employers and employees in companies with say 10 or more employees should compelled to contribute to a pension scheme whether it is the employers own or some form of state run or provided by a nominated pension provider, this at a time when increasing numbers of employers are closing good final salary schemes and replacing them with cheaper alternatives and invariably employers are paying less into money purchase schemes.
Jack Bye wrote:
I do not think people should be able to opt out of saving for their pension.
Everyone should have annual (minimum) statements showing how much they would receive if they retired a) at the end of the year, b) at, say, 60 and c) at current standard retirement age. Future estimates would have to be based on present day values. Women with children under five years old and not employed should be awarded credits as if they were employed.
Winston Lewis wrote:
Personal Accounts, this is a very good idea because people are automatically enrolled, they should not be allowed to opted out irrespective of earnings, if they do opted out we will be right back to where we are now. Individual accounts can be publish annually to see exactly how the investment is proceeding. The account should be made flexable allowing the individual to put more into the account and also attract income tax on that additional amount. I think that this government is doing some wonderful things regarding pensions, but they should be more bold and stop allowing people to opt out of personal account.