Press Release

ABI launches ‘Serious About Saving’ – the ABI agenda for action on pension reform

Stephen Haddrill, Director General of the ABI (Association of British Insurers), today launched ‘Serious about Saving’, a strategy for pension reform in the UK. ‘Serious about Saving’ is the result of three years’ work by the ABI, backed up by comprehensive economic analysis by PricewaterhouseCoopers.

Addressing the launch press conference, Stephen Haddrill said:

“There is no single ‘magic bullet’ solution to Britain’s pension problem. We need a package of reforms to encourage a new savings culture throughout every part of our society. Our proposals cover both state and private pensions. They include measures to enhance the State Second Pension, encourage employers to contribute to their employees’ pensions and improve the provision of advice about long-term savings. Our proposals are both affordable and effective and we recommend them to the Pensions Commission and the Government. We believe that a package approach is also the best basis for achieving the political consensus that the Government seeks.

“There has to be a growth in private saving as well as public pension provision. Improvements in private saving will be best achieved through the workplace, and today we recommend four key ways of achieving that.

“First, we propose that all employees should be automatically included in their company pension schemes, subject to individuals having the right to opt-out if they wish. Our research has shown that, with contributions from both employer and employee at the relatively modest rate of 3%, overall savings would rise by £4.2 billion a year.

“Second, many people collect a large number of relatively small pension pots, or stop paying into their main pension after a short period. We call for legislation to require employers who do not offer pensions for their employees to pay pension contributions into any stakeholder scheme nominated by an employee.

“Third, we propose the introduction of a new initiative called the Pension Contribution Tax Credit. This would give employers a refund of their National Insurance payments, provided they make a set level of contribution to employees’ pensions and that at least two-thirds of their workforce are members of the company pension scheme. This proposal would increase saving by around £1.5 billion, at a cost to Government of £500-700m.

“Finally, we recommend the introduction of a Workplace Advice Credit, particularly targeted at small businesses. It would entitle such firms to claim back 50% of the cost of providing a set amount of financial advice to each employee.

“Over time, this proposal would bring financial advice to four million employees, potentially closing the savings gap by as much as £2.1 billion, at a cost of around £100m each year to the Government.

“We urge the Government to develop a comprehensive package of measures to support the poor and promote a private savings culture – a package based on consensus and sound evidence.”

‘Serious about Saving’ contains fourteen key points that the ABI believes should provide the basis for comprehensive reform of the pensions system.
 
The fourteen key points in ‘Serious about Saving’ are:

Reforming State Pensions:

• Improve eligibility for the basic state pension
• Reform the State Second Pension
• Simplify and promote contracting-out
• Bring self-employed people into the State Second Pension

Harnessing the power of the workplace:

• Drive auto-enrolment hard and legislate if necessary
• Give employers stronger fiscal incentives to contribute to pensions
• Make Pension Transfers easier

Raising levels of awareness and understanding about pensions:

• Promote the savings message consistently and improve understanding of tax relief for individuals
• Create incentives for employers to provide financial advice for their employees

Encouraging people to work longer:

• Introduce more flexible annuity rules and products

A pensions industry fit for purpose:

• Provide better information on pensions for customers and continue to reduce costs where possible
• Reform the way in which financial advice is paid for
• Reform the new system of Basic Advice
• Take action to boost customer confidence in long-term savings

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