A politician has told retirement experts that pensions have an image problem - and the government is trying to resolve this.Glasgow, United Kingdom, November 29, 2011 —
There has been much coverage of the poor uptake of pension products such as annuities in the press in the past year – and one decision-maker has suggested this is because pension funds are suffering from having an image problem.
Speaking to Saga, pensions minister Steve Webb stated that low interest rates and quantitative easing have damaged these savings plans and the government’s auto-enrolment scheme will hopefully help the situation, but admitted turning people on to thinking about affording their lifestyle in old age is an obstacle.
The politician claimed he wants to change perceptions about pensions and give the public a confidence boost when it comes to retirement planning, regulating products so their charges are not too dear and offer value for money.
He lambasted the previous government, saying they damaged the UK pension system by mismanaging the economy and resulting measures such as quantitative easing are now making the market appear more volatile, with consumers not knowing how much of their investment they will see when they come to draw on it.
Mr Webb also identified difficulty in understanding the retirement finance infrastructure as a drawback.
“We need to move from a system that’s fiendishly complicated, that still leaves millions of pensioners living in poverty, to one, ideally, where we have a single, simple, decent state pension on which people can build,” he remarked, adding that auto-enrolment could help public confidence, while a flat-rate basic state pension will also go far to reassure consumers.
One of the major concerns for many regarding their retirement finance is the cost of full-time care – and Mr Webb did not skirt around this subject, stating that funding such services can lead to crippling costs for the individual.
Therefore, he recommends an insurance solution that would be managed as social or private insurance.
The politician said that if the coalition can deal with the “tail risk” factor, disability-linked annuities could follow and provide for care.
On speaking to Mr Webb, director-general of Saga and retirement champion Dr Ros Altmann said: “I am delighted the minister took the time to speak to Saga about his plans for pensions and for older people in this country. We certainly hope this government can deliver on their promises to improve the lives of pensioners and older people.”
This week, Dr Altmann stated that those over 65 are the worst hit in the UK by inflation, facing a 20 per cent additional burden on their income since Northern Rock went under, signalling the beginning of the economic downturn.
She is calling on the government to introduce higher Isa allowances to help people plan for the future and prioritise the interests of older people.
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