Pensions: Frank's field of dreams

The 'stakeholder pension' is coming but in the meantime, as we discuss here and on pages 18 to 19, there are other ways to plan ahead

AFTER much waiting the Government has announced that Frank Field, the Minister of State for Social Security who was mandated to "think the unthinkable", will publish his Green Paper on Thursday next week. The package will include proposals to change the way we save for pensions.

So in just a few years, if the Government has its way, we will all be able to contribute to our own "stakeholder" pension, one of its favourite catchphrases.

The stakeholder pension is the Government's big idea for pension provision. In part it is a reaction to the Tory idea of personal pensions and the widespread mis-selling of these products in the late 1980s and early 1990s. It is also Labour's first attempt to try to encourage more people to provide for their own retirement and so reduce the burden on the welfare state.

The stakeholder pension will be aimed at those with lower or intermittent earnings, particularly women who have children, and those who change their jobs frequently. In short, it is aimed at those people for whom a personal pension is not a viable option, mainly because of the cost and their relative inflexibility.

Although they were first talked of in Labour's election manifesto in early 1997, we still know little about the exact shape that stakeholder pensions will eventually take. Until the Green Paper appears, and despite all the rhetoric, we have seen only one document from the Government on this important issue, a consultative document published in November by John Denham, a junior minister in the Department of Social Security.

Launching the document, Mr Denham promised that stakeholder pensions would prove the answer for those who are failed by the current system.

He said: "They need security, and to be able to understand exactly what they are buying and why. They need to know that, whatever way their career may take, their pension will be flexible enough to secure their retirement."

The paper set out in general terms how the stakeholder pension should operate, but offered few specific answers. It did, however, offer an insight into the way the Government's thinking might develop when more concrete proposals are unveiled.

The Government believes it has identified many possible takers, including industries such as agriculture and engineering, which do not have well developed occupational schemes. The self-employed would also have access to such a scheme, so that temporary employees could contribute as part of their overall salary package. Alternatively, it might be a scheme based around a particular region.

The Government also makes it clear that it expects any stakeholder pension to be much simpler and cheaper than a personal pension.

Simplicity, security, flexibility and value for money are the main buzzwords used by Mr Denham, who has long argued that personal pensions are not suited to the flexible work patterns many people have.

To help achieve its aims, the Government is also proposing to introduce kite-marking through which individual schemes will be government-approved. Only those that fit the Government's criteria will be awarded a kite mark.

One key area that Mr Denham's paper did not address, however, is whether people should be forced to contribute to a second pension. Many in the pensions industry argue that the only way that stakeholder pensions can be made into a success is if they are made compulsory, otherwise the take- up will be too small. Many in government privately agree and Mr Field may cover this ground in his Green Paper proposals.

Most pension providers, as well as a large number of consumer organisations who responded to Mr Denham's document, argued that compulsion was essential for the scheme to be a success. The Government is understandably nervous about the issue of compulsion. Most of us are all in favour of the future until it hits our pockets today.

Until the Green Paper appears, it is unclear who will run the scheme. The traditional pensions industry is still in the doghouse because of the personal pension mis-selling scandal. The Government has already threatened to bar companies that have been slow in providing compensation to mis- selling victims. But it is these companies that have most of the expertise and the resources to make stakeholder pensions work. The Government could, however, look to friendly societies and investment companies to provide the backbone for the scheme.

However, even after publication of Mr Field's Green Paper, there will then be a lengthy consultation process. So it is likely to be at least year before we know exactly what the final details of a stakeholder pension will look like, and a few more years after that before we can actually invest in them.

q Tony Bonsignore writes for 'Financial Adviser' magazine.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
News
Andy Davidhazy at the beginning (left) and end (right) of his hike
video
News
Taylor Swift is applying to trademark song lyrics from 1989
people
Voices
The popularity of TV shows such as The Liver Birds encouraged Liverpudlians to exaggerate their Scouse accent
voicesWe exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
Life and Style
Parker says: 'I once had a taster use the phrase 'smells like the sex glands of a lemming'. Who in the world can relate to that?'
food + drinkRobert Parker's 100-point scale is a benchmark of achievement for wine-makers everywhere
News
i100
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

How to make your own Easter egg

Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

Bill Granger's twist on Easter Sunday lunch

Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
Joe Marler: 'It's the way I think the game should be played'

Joe Marler: 'It's the way I think the game should be played'

The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

Cricket World Cup 2015

Has the success of the tournament spelt the end for Test matches?
The Last Word: Justin Gatlin knows the price of everything, the value of nothing

Michael Calvin's Last Word

Justin Gatlin knows the price of everything, the value of nothing