Your Money: A little less consultation and a little more action

It is four months since the Government released its Green Paper on pensions, and responses from the industry were flooding in last week.

If you remember, the Green Paper was intended to address the savings gap – the £27bn annual shortfall between what we need to save for our retirement and what we are actually putting by. Although the Government won't concede there is a pensions crisis, despite all the evidence to support that gloomy claim, it did admit many changes are needed to persuade us to save more for retirement.

As we report on page 12, stakeholder pensions have not been the success that the Government had hoped they would be. And as the number of final salary schemes being closed by companies grows from a trickle to a flood, something has to be done.

But the general consensus within the pensions industry is that the Green Paper doesn't go far enough. The Association of British Insurers (ABI) argues that in its current form it "will not provide today's workers with decent incomes in retirement". The ABI warns that unless more radical reforms are introduced, we will be back in this position in several years' time, discussing what can be done to address an even greater savings gap.

The ABI also wants state pensions to be reformed, arguing that this will provide a solid foundation on top of which individuals can build retirement savings via private pensions, secure in the knowledge that it "pays to save".

Insurers also point out that there must be increasing awareness of the need to save. Many people, particularly in their twenties and thirties, just don't think about pensions and put off saving for them until they realise with a panic in their forties that they need to do something – and quick. A hard-hitting government campaign, backed by compulsory employer contributions into pension schemes, seems the best way of raising awareness.

Putting off investing in a pension is going to have implications in the long term. And delaying the introduction of the substantial pensions reform so desperately needed will also have long-term implications. The Department for Work and Pensions aims to bring in pensions reform in April next year, although Norwich Union says this is an unworkable deadline, with 2005 a more realistic date.

Yet the longer the Government and the industry leave it, the worse the pensions crisis will become. We need to start saving more now, and the Government needs to make it easier for us and to produce a convincing case to persuade us. Combining a long-term view with immediate action is the only way we can start the laborious task of solving the pensions crisis and bridging the savings gap.

m.bien@independent.co.uk