This is the html version of the file http://www.helptheaged.org.uk/news/pdf/ppt_scot.pdf. G o o g l e automatically generates html versions of documents as we crawl the web. To link to or bookmark this page, use the following url: http://www.google.com/search?q=cache:L7xadFlP2_sC:www.helptheaged.org.uk/news/pdf/ppt_scot.pdf+compulsory+pensions+saving&hl=en&ie=UTF-8 Google is not affiliated with the authors of this page nor responsible for its content. These search terms have been highlighted:  compulsory  pensions  saving

---

Page 1

Help the Aged position

There should be a well-communicated, clear and fair contract between the state and its

citizens for providing decent incomes in retirement. This contract should focus on the

individual's rights and responsibilities, and on the state's role in providing choice,

independence, dignity and security in older age.

The balance between earned state pensions and means-tested benefits should be re-balanced

so that people see more benefit from their contributions and savings. This means recognising

the role the State Pension plays as a platform on which other savings can be built, and

increasing the pension so that it achieves this role.

Saving for a second pension should be compulsory upon individuals in whatever sector they

work, at specified proportions of income. All members of society have a responsibility to

provide for their own retirement.

There should be a much bigger and better strategy for raising awareness of key issues at

different stages of life, from communication of personal responsibility in youth to "claim your

rights" campaigns in older age. Help the Aged welcomes the Government's first moves in this

direction, but believes much more needs to be done.

The Government should take a more active role in maintaining confidence and security in the

private pensions and savings market. Pension scandals and mis-selling and problems with

annuities and gilts all act to undermine the policy of encouraging people to provide for

themselves. Similarly, endless changes to state pensions and benefits, particularly the

controversy over SERPS, can promote cynicism and scepticism, about the value of saving.

Retirement should be made a more flexible process. Pension rules and age discrimination

legislation should allow people to move on or work on outside traditional retirement ages by

mutual agreement and actuarial adjustment. Pensioners should receive the full value of the

state pensions they have earned, wherever in the world they choose to live in retirement.

Help the Aged Scotland Policy Statement

Providing Pensions for Tomorrow

March 2001

Demographic trends towards an older population, and towards people living much longer into

retirement, further increase the challenge of providing decent living standards for tomorrow's

pensioners, especially increasing public expectations about quality of life in retirement. The

Government has a responsibility to provide the framework to allow people to make the right

choices and save with confidence and security. Only the Government can provide decent state

pensions as a safety net for those who cannot save and to provide a platform on which people

can build private savings. A further paper considers Tackling Pensioner Poverty Today.

Evidence

Over recent decades the numbers of people with private or occupational pensions and

other savings, such as stocks and shares has increased rapidly. Tomorrow's pensioners will

on average be wealthier than today's. But these changes mask wide disparities, and many

have been unable or unwilling to take part in this move towards greater personal saving

and pensions.

G

According to the National Association of Pension Funds, 37% of workers today are not a

member of an occupational scheme and have never had a personal pension.

G

An Institute of Fiscal Studies' survey found that half the population has less than £750 in

liquid savings (i.e. in banks and building societies, shares or Tessas).

The State Pension has continued to be up-rated with prices and therefore has decreased in

relative value. In 2001/2 the basic pension will be worth just 17% of average earning. By

2020 it is estimated that it will have fallen to only 13% of earnings, if the State Pension

continues to rise with prices. Meanwhile, means-tested benefits ­ the new Minimum Income

Guarantee (MIG) and soon the Pension Credit (PC) - are soaring in importance and value.

The Government's strategy on second pensions has been to replace the State Earnings Related

Pension Scheme (SERPS) with a new State Second Pension (S2P), for people earning up to

£9,500 a year. Those earning more are expected to opt out of the S2P into a personal or

company pension, or the Government's new Stakeholder Pension.

The new S2P will eventually be paid out at a flat rate, rather than a level dependant on

earnings. If present pensions policy is continued, in the future a full income from the State

Second Pension and State Pension will only just push recipients above the MIG threshold.

Given this, the majority of people will see very little benefit from their S2P, as they will be

contributing to a pension they would have received anyway. There is no requirement for self-

employed people to have a second pension, and only around half of the self-employed are

currently contributing to one.

The new Pension Credit is designed to tackle savings disincentives by rewarding those with

small pensions and savings, with an income boost above the level of the MIG. However, the

evidence suggests that the PC will not redress the imbalance in the system: The Institute of

Actuaries estimate that in 2000, the main means-tested benefits, MIG, Council Tax Benefit and

Housing Benefit were worth the equivalent of £92,000 of life savings to someone aged 65,

whilst the State Pension was worth just £47,000. Therefore, there is a gap of £45,000 for a

saver to bridge, before any benefit is received above someone with no savings, but in receipt of

all those benefits.