Pressure on government and industry to promote pension savings

In a recent press release, the ABI gave its support for Personal Accounts but only on the basis that they add to savings rather than undermine existing pension provision. This position is supported by consumer research carried out for Defaqto’s Retirement Savings & Income report 2007.

This revealed that 71% of those surveyed will be relying on the State Pension to provide them with income in retirement while 49% stated that they will rely on their employer’s pension scheme, 24% will rely on bank or building society savings and 22% said they would be relying on personal pension savings.

Matt Ward, Defaqto’s Principal Consultant for Pensions & Wealth Management and lead author of the report, stated that: “These findings underline the pressure on the Government to better encourage private pension savings and to deliver a successful Personal Account proposition, thereby alleviating future strains on the State system. They also confirm that employers will have a huge role to play in future pension provision in the UK.”

Defaqto’s research also aimed to identify ways in which pensions savings plans could be made more attractive to consumers. Chief among these were providing more guarantees regarding investment returns and improving tax incentives. A significant proportion of people wanted to be able to pass on pension funds to dependants, while greater flexibility and more control were also given as important ways that pension savings could be made more attractive.

Ward goes on to say that: “The research proves that all is not lost with regards to engaging consumers with pensions saving plans but consumer needs must be put at the forefront of all future planning in this area. The challenge is therefore laid out to both Government and industry is to deliver retirement savings and income propositions to meet these needs.”

The table below shows consumer responses to the question “Which of the following would make pensions savings plans more attractive to you”?

More of a guaranteed return 36%
Better tax incentives 33%
Being able to pass on 28%
More flexibility over taking benefits 26%
More control over investments 22%
Simpler products 20%
Cheaper products 16%