10 February 2006
Following the publication of the Pension Commission Second report in November 2005 and the subsequent offer from Stephen Timms, Minister for Pensions, for the view from industry, Winterthur Life says the UK pensions system must use the workplace as the foundation stone for all reform.
Winterthur Life believes Adair Turner has been instrumental in helping place the need for pensions reform at the top of the political and media agenda. There is much to be commended, including a recommendation for an improved basic state pension, auto-enrolment, and less means-testing. Winterthur Life is however strongly opposed to the National Pension Savings Scheme (NPSS) proposal in its current form and believes it will have a dramatic negative impact on current company-based provision in the UK if employers are allowed to switch away from their final salary or money purchase schemes. The emphasis of reform should be on levelling up, not levelling down, which Winterthur Life believes is the huge risk with the current NPSS proposal.
Winterthur Life therefore believes that pensions reform must use the current company-based provision as its foundation, ensuring employers are incentivised to maintain a good scheme, and that employees are auto-enrolled, and have access to effective communication and education to help them understand their options. A new industry-run but Revenue-backed pension scheme should then be developed for those people where no company pension scheme exists, using current group stakeholder infrastructure. Any undermining of existing company-based schemes - precipitating a “race to the bottom” - must be avoided in any plans for the new pension.
Winterthur Life urges the government to adopt a framework focusing on a return to a traditional three pillar approach, which incorporates several of the options already put forward by Turner.
- The first pillar should be a pension for all retired UK citizens of around £105-£110 per week. This would involve reducing/removing means testing and other benefits to deliver a sound, clear basic pension for all
- The second pillar should be good company-based provision with particular focus on auto-enrolment/soft compulsion, education and workplace education and communication to encourage employees to understand their pension scheme and to want to contribute
- The third pillar of personal savings would use forecasts, illustrations and benefit statements to explain what people are likely to receive (or more importantly what they are not likely to receive in retirement). This would demonstrate the gap between what people would get and what they will need, underpinned with online ‘guidance’ services provided by pension providers and other specialists to help consumers forecast their total retirement benefits. This is where a Revenue-backed pension scheme could be introduced where no company scheme exists, for the self employed and other groups not covered by a pension scheme.
Mike Kellard, chief executive officer, Winterthur Life, says, “A system offering a good basic state pension not dependent on means testing, support for companies to offer good company arrangements that employees are in and want to be in unless they opt out, backed with education programmes, and a framework of private investment is the most logical and sensible way forward.
“The appetite and the infrastructure exist to achieve this. In the past, the government has successfully changed public perception - for example when the government wanted to privatise nationalised industry in the 1980s there was a successful media campaign that educated and built an appetite for share ownership at all levels within society where the idea of equity investment would previously have been unthinkable. It now needs to do the same with responsible retirement saving. We urge the government to be bold.”
For further information:
Paul Riddell Winterthur Life, Press Office +44 (0)1256 798099
Sandra Fulton Winterthur Life, Press Office +44 (0)1256 798310
Christine Wood Financial Dynamics +44 (0) 207 269 7253
Notes to Editors
About Winterthur Life UK Limited
Winterthur Life UK Limited is part of Winterthur Group, which is part of Credit Suisse Group, a leading global financial services company headquartered in Zurich.
Winterthur Life UK offers pensions and investments for high net worth clients distributed via top tier IFAs and is renowned for its innovative approach to financial products. Its philosophy of transparent product propositions offers advisers a range of retirement and investment solutions with an open charging structure.
Winterthur Life UK is one of the UK’s top 10 providers of single premium personal pensions, trustee investment plans and corporate pensions via IFAs and a leading provider of self-investment retirement plans like Self Invested Personal Pensions (“Sipps”).
Any opinions expressed in this media communication are made as at the date of publication but are subject to change without notice. Past performance is not a guide to the future. The value of shares/units and the income from them can go down as well as up. Exchange rate fluctuations may cause the value of underlying investments to fall as well as rise. Yields are not guaranteed and may fall or rise.
Winterthur Life UK Limited is authorised and regulated by the Financial Services Authority.
www.winterthur-ifa.co.uk
Winterthur Group
Winterthur Group is a leading Swiss insurance company with head office in Winterthur. As an international company, the Group provides a broad range of personal, property and casualty insurance products, as well as insurance solutions in life and pensions that are tailored to the individual needs of private and corporate clients. Winterthur Group has approximately 19,500 employees worldwide. The company achieved a total business volume of CHF 22.9 billion in the first nine months of 2005 and reported assets under management of CHF 152.9 billion as of September 30, 2005.
Credit Suisse Group
Credit Suisse Group is a leading global financial services company headquartered in Zurich. Credit Suisse, the banking business of Credit Suisse Group, provides its clients with investment banking, private banking and asset management services worldwide. Credit Suisse offers advisory services, comprehensive solutions and innovative products to companies, institutional clients and high-net-worth private clients globally, as well as retail clients in Switzerland. Credit Suisse Group also includes Winterthur, a Swiss general insurer with a focus on international business activities. Credit Suisse Group is active in over 50 countries and employs approximately 60,000 people. Credit Suisse Group’s registered shares (CSGN) are listed in Switzerland and, in the form of American Depositary Shares (CSR), in New York. Further information about Credit Suisse Group and Credit Suisse can be found at www.credit-suisse.com. Further information about Winterthur can be found at www.winterthur.com.
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