Flagship attempts by the government to encourage low-income families to save for retirement have been branded a failure by the Trades Union Congress.
Average contributions to stakeholder pensions have been skewed by a number of wealthy people taking advantage of tax breaks to buy policies for family members, the TUC said.
Stakeholder Response: Help the Aged
Mervyn Kohler, Help the Aged head of public affairs, said: "The TUC research shows that this flagship policy, launched with such a fanfare in 2001, is failing to appeal to the target group it was supposed to help. Not many employees on low or average incomes are saving for a stakeholder pension, and not many of them are making significant savings.
"The reasons for this failure are several and complex. In two key areas, the government approach to pensions has contributed to the disappointment of stakeholder pensions: its policy to provide pensioners with means-tested benefits (rather than a decent state pension) destroys the incentive for people on low or average earnings to save for retirement, and its failure to insist on employer contributions leaves personal savers facing an almost impossible task of building a decent pension.
"This is yet further evidence that pensions policies are in deep disarray. There are hard decisions which urgently need addressing, but the political leadership is drifting aimlessly."
Stakeholder Response: National Consumer Council
Claire Whyley, deputy director of policy at the National Consumer Council, said: "These figures are shocking, but not surprising. Lack of trust in pensions providers - government, employers and the pensions industry - shone through NCC research as one of the reasons for their reluctance to save.
"Which is why, if government really wants to boost the pension’s gap they must implement an adequate, simple and secure state pension where everyone receives the same basic pension – regardless of their work record."
Stakeholder Response: Association of Retired and Persons Over 50
Paula Wallace, spokesman for the Association of Retired and Persons Over 50 (ARP/O50), said: "We are not surprised that Stakeholder Pensions have not been a success with lower paid workers.
"The average person has become increasingly cynical and wary of the private pensions industry.
"Statistics bear this out: 41 per cent of workers in this country do not have an occupational pension and this number is growing every year. ARP/O50 has consistently stated that the government should turn its back on private pensions and introduce a universal, non means tested state pension linked to average earnings and paid at a level which would provide underpinning for additional personal provision.
"We advocate an 'add on' facility within the State system whereby the the payment of additional voluntary contributions could enhance the level of income on retirement.
"This would undoubtedly be a far better way to end the pensions 'crisis' in this country, rather than continuing to promote stakeholder pensions, which remain unpopular among the very sector of the population they were designed to attract."
