Money: A golden age for pensions?

A RANDOM sample of commuters questioned recently on Waterloo station were asked what Serps stood for. Seven out of 10 thought it was the French railway system. Nice try. In fact it stands for the state earnings-related pension scheme.

But it's no wonder we are confused. Last week a pensions guru from Scottish Life told an audience of financial advisers that there have been seven "big" pension ideas from various governments since 1961.

Some of them came into force, most importantly Serps, which started in 1978. But most of these ideas have been consigned to the wastebasket for political reasons. The late Sir Keith Joseph masterminded a plan remarkably similar to New Labour's proposed stakeholder pensions. But then the Conservatives lost the 1974 election and the plan went in the bin.

People on modest incomes who are coming up to retirement have spent almost 40 years at the mercy of these political initiatives, to the detriment of their pensions. There was even a gap in "second-tier" pension provision between 1974 and 1978, before Serps came in.

(A second-tier pension is paid on top of the basic state pension and offers you extra money in retirement based on your National Insurance record and earnings. A Serps pension for someone on average earning retiring now is pounds 60 a week.)

Those lucky enough to be in good company pension schemes, and the better- off who have organised effective personal pensions, have been able to avoid all this confusion.

If (or rather, when) Labour wins a second term in office, we should at least get some consistency. We might actually see stakeholder pensions come into force. And if, as expected, all workers have to fund their own stakeholder pension out of their pay packets, we should understand where the money is going. So that's at least one improvement on Serps.

Perhaps stakeholder pensions will help to close the huge retirement income gap in the UK.

While the badly off and badly advised have suffered under successive governments - remember that the pensions mis-selling scandal stemmed from a government desire to get us out of Serps and into personal plans - the knock-on effect is that there are now some excellent personal pension deals for clued-up, wealthier customers.

The latest innovation comes from advisers Hargreaves Lansdown. The company has unveiled a "pensions direct" arm, offering a selection of the best- performing pension schemes from big names including Royal & SunAlliance, Standard Life and Equitable Life.

It's a simple idea. Hargeaves Lansdown sends you the information and performance figures, you make a choice, and then it pays you 80 per cent of the commission it gets back into your pension fund. Hargeaves Lansdown estimates that financial advisers can earn pounds 900 for selling a pounds 100 a month pension policy.

Pension buyers who prefer to do their own financial planning should check this out. Call 0117 900 9000.

q You can e-mail Isabel Berwick: i.berwick@independent.co.uk