The State of the Nation’s Savings
The title of this BeeLine is the same as the title of a survey put out yesterday by the Association of British Insurers (the ABI). The BeeLine’s title could just as easily have been ‘I Told You So!’ or something like that. The ABI survey, that was carried out for them by YouGov in September 2006, is the latest in a series of similar surveys the association has undertaken in recent years and will be gloomy reading for the Government as they try to convince us that their ideas for a national scheme of Personal Accounts has got legs.
Some of the depressing stats that preface the report will already be well known to BeeLiners, but to list them anyway:
- There are 7.9 million non-savers; working people who are not saving anything at all in a pension.
- There are 4.3 million under-savers; working people who are saving too little in a pension to provide an adequate retirement income.
- There are 11.1 million adequate savers; working people who are saving enough in a pension to provide an adequate retirement income.
Against that background the survey found that almost half of the respondents thought that ministers were making empty promises by saying a new national savings scheme would be put in place. That said, just about half of them also stated that if such a scheme were to be put in place they’d opt out of it anyway.
The whole report, The State of the Nation's Savings, 2006/2007, may interest you and you can get a copy to download and print off by clicking the link if you want. It makes interesting, if depressing, reading, but it is this idea that so many of the people the national scheme of Pension Accounts is aimed at are likely to shun it that is something that worries me enormously.
You will remember one of my more recent BeeLines I put out as part of my Battle of the Blogs with your man James Purnell where I was trying to get the minister to say whether the proposed Personal Accounts will be structured as personal pensions or as an enormous occupational pension scheme. (That BeeLine was calledPersonal Accounts and consumer protection and you can download it from the Ether if you’d like another read of it.) I didn’t get a straight answer (or any answer, in fact) to that simple question, which left me thinking that it is more likely that Personal Accounts will actually be structured as a big occupational money-purchase scheme.
That’s highly significant in the light of the findings of the ABI’s survey. What it would mean would be that over about five million people could end up getting swept up into the national scheme of Personal Accounts only to immediately leave it again. What they would effectively be leaving, however, would be an occupational pension scheme with a guaranteed 3% contribution by their employers. There is a term we have become used to lately to describe people who leave an occupational pension scheme thereby foregoing their employer’s contribution towards their pensions. They are called ‘opt-outs’. By and large, once someone has put themselves in that position there isn’t a whole lot the financial services industry can ever do for them again; the only advice they can be offered would be to join their employer’s occupational pension scheme.
Before we go over that particular cliff I can only hope I’m not the only lemming in the crowd who worries that the guys leading this current headlong charge have taken all that into account. Once we’re airborne there’s no way back…..
23 November 2006
Source: Association of British Insurers - The State of the Nation's Savings, 2006/2007.
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