Greengates Builders Merchants

Government plans to persuade people to save for their old age will it work? asks “Greengates Builders Merchants Accrington, Lancashire.

Private retirement savings will be ring–fenced using a new insurance scheme, Contributions will be protected against financial disaster under the plans, which are intended to boost confidence and simplify the complex pensions industry. This means savers will be guaranteed to get back whatever they put in as well as benefiting from any tax breaks.

Pensions Minister Steve Webb said: "Many people are concerned about the complexity of pensions and the jargon used. We want to make the system as simple as possible and remove any fears about losing money. We want people to know that whatever they save, they will get back.

"They will receive a simple statement each year showing exactly what they have put by and that, along with any tax relief, will be a guaranteed minimum that they will get back. Any investment profit will be on top."

Mr Webb wants to see a new insurance policy taken out by pension funds on behalf of savers which protects them against any loss of their contributions.

This would protect funds against falling stock markets or the collapse of companies.

He is expected to discuss the policy when he appears before the Work and Pensions Select Committee this week.

Industry experts welcomed the proposals.  Malcolm McLean, consultant to actuarial firm Barnett Waddingham, said: "This is an idea that may have found its time.

"With people enjoying longer and healthier lives it is more important than ever that they have a proper pension plan in place to sustain them through those extra years of retirement.

"We know that over half the working population is saving little or nothing towards their future and are effectively sleepwalking into a very uncertain and impoverished old age.

"The more individuals can understand and feel confi– dent about their pension plans the better.

"Minimum guarantees, simpler rules and clearer communications all have a major part to play in re–invigorating pension saving and all initiatives to that end should be encouraged and supported."

Joanne Segars, chief executive of the National Association of Pension Funds, said: "Our surveys show a low level of confidence in pensions so the minister is right to explore new ways of improving savers' confidence."

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