The arguments for private pensions are well understood. The healthier, wealthier populations of the developed world are living longer in retirement, imposing an increasing pensions burden on the taxpaying workforce. If Western governments are to avoid spiralling taxation, they must attempt a two-pronged assault on the problem - cutting state social security benefits and encouraging people to save more towards their own retirement.
This logic, once resisted by Labour, is increasingly accepted by Tony Blair and his team.
Pension experts fear the message has still to get across to the man in the street. Changes already made to the state earnings-related pension scheme (Serps) will significantly reduce its value for those retiring in the next century. The increase in the female retirement age from 60 to 65 also threatens to impose an additional burden on many families.
Pension companies believe the Government has failed to make it clear how these and other changes will cut back the support available from the welfare state. Tony Reardon, pensions development director at the insurance company Allied Dunbar, says: "The Government has got to be honest with the public and say, 'We are reducing state pensions'. I would like to see the Government doing a lot more advertising on pensions."
With a large and growing need for private pension provision, Britain's pensions industry should be enjoying a bonanza. But the opposite is true. This year's sales of regular-premium pensions policies (where you save monthly) look set to reach little more than half the number sold in 1991.
This paradox is explained by the two huge scandals that hit the pensions industry in recent years. Personal pensions, first introduced in 1989, appeared to have been a great success story for the life insurance industry, with more than five million policies sold.
But two years ago, it became clear that hundreds of thousands of investors had been badly advised either to leave good company pension schemes, or to transfer previously accumulated retirement savings into a personal pension. The cost of putting right the resulting financial damage has been estimated at anything up to pounds 4bn. Public confidence in the life insurance industry, never strong, was dealt another heavy blow. Financial watchdogs pushed through a wide-ranging series of reforms to prevent a repetition.
Many financial advisers seem to have concluded that selling personal pensions is more trouble than it is worth. On top of the usual checks they have to make when selling financial product to a client, personal pensions involve another layer of complexity.
Alan Goodman, assistant general manager with the insurance giant Standard Life, says: "It's extremely difficult to buy a personal pension these days - and equally difficult for someone to sell the product and go through the whole lengthy process."
Insurers have adopted so-called transfer analysis systems to assess any potential customer considering switching his accumulated company pension savings into a personal plan. Mr Reardon is sceptical about how much benefit investors derive from the highly complicated documents that emerge from transfer analyses. "Producing these analyses does not always help the client," he says. "They protect the adviser."
The Robert Maxwell affair, the other pensions scandal of the Nineties, damaged public confidence in the other side of the private pensions industry - employer-run schemes. Its most lasting effect has been a new Pensions Act, which has introduced new solvency requirements for company schemes and other safeguards.
Some fear that the Pensions Act will reinforce the move away from "final salary" schemes - the traditional type of company pension that pays beneficiaries an income based on their earnings in the last years before retirement. Anxious to control costs, employers increasingly favour schemes in which they can fix the level of contributions. Employees belonging to these "money purchase" schemes have much less idea of the level of pension they can expect to receive when they retire.
One factor that should encourage more people to save more for retirement is the increased recognition of the problem the elderly face in paying for long-term care. In his recent Budget, the Chancellor, Kenneth Clarke, promised a range of measures to encourage saving for long-term care - including a tax exemption for benefits paid by specialist insurance policies. He is also considering allowing occupational pension schemes to pay variable pensions - which could pay a small income immediately upon retirement, and a larger amount in later years, when more people are likely to need long-term care.
This could offer some pensioners useful additional flexibility. Unfortunately, few people retire with enough savings to allow them to defer the greater part of their pension for a few years. Most go for the highest pensions they can, because they need to.
Similar problems arise with flexible annuities, which allow people to defer taking their pension in the hope of being able to make their decision in a more favourable interest rate environment. In the meantime, they can draw upon the income earned by their pension fund. But this will be substantially less than their pension entitlement. And pensioners who opt for a flexible annuity must also accept further uncertainty over the future performance of their pot of pension savings.Reuse content