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The proposals of the Pensions Commission offer a great and unique opportunity to reverse the decline in private pension provision and restore confidence in long-term savings. Stakeholder pensions have not been successful in halting the downward trend in non-State pension provision among middle income earners. If significant progress is to be made in encouraging long-term pension savings in this group, it is essential that any new pension savings vehicle is designed so as to minimise the need for financial services regulation about the suitability of the product for its target market. Success in removing the costs of such regulation depends upon a decision about the employer contribution and long-term trends in means-tested State provision for pensioners.
If this opportunity is to be seized there needs to be an integrated approach in which three pre-conditions are met. The first pre-condition is that the correct balance is struck between the role of the State in securing and promoting a new pension savings product and the sense of individual ownership. The second pre-condition is that the new product maintains the simplicity and near-universal suitability proposed by the Pensions Commission to minimise cost and the need for regulation. The third pre-condition is that reform of private pension saving takes place in tandem with a new direction in the State pension system.
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