Government releases preliminary results of its pensions review

In November 1997, the UK Government began to unveil the preliminary results of its review of the pensions system.

Since deregulation in 1986, the UK's system of pensions provision is seen by some to have degenerated into something of a turmoil. Cases of bad practice and bad advice by many financial companies have led the Government to order compensation for thousands of individuals who were made worse off through following advice to take out private pension schemes, rather than stick with occupational pension s.

The situation has forced the Labour Government, which came into power in May 1997, to launch a consultative review of new ways of providing pensions and filling the gap between the declining state pension and those provided by the large occupational schemes (UK9710172F). In November, the Government released the preliminary results of its review and outlined a new "stakeholder" pension scheme which, although initially intended as a top-up to the state scheme, could, it is thought, ultimately replace the present state schemes. The stakeholder scheme is aimed at those with what may be described as "insecure" employment - ie self-employed people, part-timers, the low paid and those on short-term contracts. It is hoped that the new scheme will ensure cheaper pensions provision than personal pension schemes.

Many organisations welcome the Government's review of pension provisions, and the proposed stakeholder scheme, but feel that the future of pensions will become safe only if there is a compulsory element to it. The Engineering Employers' Federation (EEF), for example, argues that employers should be allowed to make membership of their occupational pension schemes or an accredited pension arrangement a condition of employment. The EEF also calls for a simplification of legal requirements and Inland Revenue tax rules for occupational pension schemes. Keith Pacy, chair of the EEF pension provision group, said that the Government "needs to create a broader political consensus around pension provision so that both organisations and individuals can plan with confidence for their future pension provision". The National Association of Pension Funds also called for the Government to make it compulsory for all employees to save at least 10% of their income, with employers contributing half of that amount for a second pension.

The Trades Union Congress (TUC) is highly critical of personal pension plans and deeply concerned at the lack of progress with the "mis-selling" review, in which over 400,000 people are said to be still waiting to be compensated for bad pensions advice. At the end of October, the TUC signalled that it would be interested in entering the pensions market itself in a bid to fill the gap for its members. Now the Government has signalled that it would welcome provision by the unions, as an option, along with private sector firms.