Press Release

Too little money in too many pension pots – ABI calls for reforms to help savers

28 July 2005

People in work are saving too little. But the ABI (Association of British Insurers) says that they also lose out because they often collect a number of small individual pension pots during their working lives as they move jobs or change their pension provider.

The ABI is today calling for action from pensions providers and the Government to make it easier for savers to consolidate their savings into fewer, but larger, individual funds. In a new policy paper which is being sent to the Pensions Commission for consideration, the Association argues that this ‘proliferation’ of pensions makes saving more complicated and costly for consumers, while also making administration more difficult for companies. The result is lower savings and incomes in retirement than would otherwise be the case.

New data released by the ABI in its report shows that:

• 21% of people aged over 50 in paid employment have three or more private pensions;
• 62% of employees say that they stopped paying into their first pension because they changed jobs;
• changes to pensions legislation and increased labour mobility mean that the number of people with these complicated pension arrangements is likely to grow unless action is taken to reverse this trend.

To help remedy this situation, the ABI is proposing three new measures:

• the ABI is leading an industry initiative to develop a single pensions transfer process for the pensions industry, with a common transfer form and standardised transfer arrangements. First results are expected to be available before the end of this year;
• the ABI is calling on the Government to reform pensions legislation so that employees can require employers who do not provide pensions to pay their employee pension contributions into a specified stakeholder pension scheme of their choice;
• the ABI is proposing a new Workplace Advice Credit, particularly aimed at small businesses, to encourage the provision of financial advice via the workplace.

Helen McCarthy, the ABI’s Head of Pensions and Savings, said:

“Together with other initiatives such as increased auto-enrolment, these proposals could have a significant positive impact on levels of pension saving and improved value for consumers. Neither the Government nor the pensions industry has so far appreciated the full impact of this unnecessary complexity on consumers. It is time that we introduced more simplicity, better service and greater choice.”

• Copyright 2008 Dod's Parliamentary Communications Ltd
• About ePolitix.com
• Stakeholders
• Contacts
• Terms & Conditions
• Blog guidelines