Confusion reigns over stakeholder pensions

The Government's failure to produce comprehensive pensions legislation is leading to confusion over pension planning.

A survey from the National Association of Pension Funds says employers are keen to instigate change but their hands are tied because of the piecemeal nature of the Government's plans.

Unless Jeff Rooker, the Pensions Minister, makes a concerted effort to clarify the future direction of the pensions industry, retirement fund provision will suffer.

This year only 12 schemes (3 per cent of the total number) have improved their benefits, compared with 7 to 10 per cent over the past five years.

Chris Armitage, pensions manager for Unigate, claims that the lack of change is not because of unwillingness among employers to increase spending on pensions but because of uncertainty over what the proposed changes will mean.

He said:"The survey shows that a third of employers would be happy to make their schemes compulsory for employees - a move that would obviously involve an increase in ex-penditure.

"The problem is that it is getting harder to establish and run schemes.

"With more legislation likely over the next 10 years, companies are reluctant to instigate changes now when more will be needed in the near future."

Pensions, by their nature, are geared towards the long term. But as the Government dithers, pension managers are having trouble predicting what is going to happen in the future.

The NAPF attributes the lack of certainty to the absence of a grand strategy on the part of the Government.

"We welcome the consultation that the Government has given us," says Ann Robinson, director-general of the National Association of Pension Funds. "But the legislation that follows is just piecemeal and doesn't go far enough."

Plans for stakeholder pensions are set to be introduced in April. The intention is that they will encourage people to save towards their retirement. But worryingly, 72 per cent of those who participated in the NAPF survey and operate money purchase schemes, still do not know whether they intend to apply for their pension scheme to be registered as a stakeholder scheme.

At this stage, not one provider will stick its neck out and commit itself to replacing existing arrangements with a stakeholder scheme.

The stakeholder plans are the main cause of uncertainty because the Government has yet to disclose the tax details. Until it does so, committed support for the new plans is unlikely to be forthcoming.