More beef for the pension plan

A compulsory personal pension plan for all staff unable to join a company pension scheme and self- employed people is being urged on the Government by occupational pension fund providers.

They argue that such a scheme would help both to prevent further personal pension mis-selling scandals and to ensure that everyone is provided for in retirement.

The plans, announced this week by the National Association of Pension Funds representing 7 million people in employee schemes, would involve companies and staff each paying contributions of 5 per cent of an individual's salary into a pension plan. The self-employed would pay 10 per cent.

The plan's aim would be to pay a pension income of about 50 per cent of a person's income at retirement, although this would not be guaranteed.

Five-yearly reviews of the fund's position would be carried out to determine whether on the basis of its performance contributions should be increased or lowered. People over the age of 50 would have reviews carried out at least every two or three years.

At the same time, this would allow the Government to wind up its State Earnings Related Pension Scheme (Serp), which is already set to pay diminishing benefits to millions of people who pay contributions.

Peter Murray, Unilever pensions manager and one of the authors of the NAPF plan, said at the association's annual conference in Birmingham this week that such a scheme would be of particular help to the low-paid. "It is becoming clear that the state is unable to meet the bill for people in retirement," Mr Murray said.

"What we need to do is to promote the idea of compulsory saving for individuals. This way, those in particular need could be targeted for help, while everyone else would be encouraged to provide for themselves."

The NAPF's proposals involve funds being managed by private companies.

Fund managers wanting to grab a slice of the business would have to guarantee low charges. The NAPF believes this would prevent complaints by many individuals who have seen charges set by insurance companies for existing personal pensions grab up to a third of contributions.