In focusing on the need to stabilise employer costs and administrative burdens, the Pickering report on pensions has failed to come up with a blueprint which will restore consumer confidence in private pension schemes, says the Association of Chartered Certified Accountants (ACCA).
“The report makes a number of suggestions as to how companies can prevent their pension costs from spiralling out of control,” says ACCA. “The emphasis on reducing unnecessary red tape will be warmly welcomed by employers which have faced a steadily increasing compliance burden. But some of the report’s proposals will make saving for pensions less attractive. These include, for example, abolishing the requirement to apply limited price indexation (LPI) to pensions in payment and scrapping requirements to pay pensions to spouses.”
John Davies, Head of Business Law at ACCA, said: “Consumer confidence in private pensions is suffering because their ability to deliver decent retirement incomes has been thrown into doubt. Simplifying the rules and reducing burdens on employers is not sufficient. Increasing consumer confidence cannot be achieved without tackling the crucial issue of funding. The basic purpose of pension schemes is to pay decent incomes to retired people, and the conditions in which they operate must be structured so that they can do this.
“Pickering has not addressed the practical ways in which defined benefit and contribution schemes could win back consumer confidence. These include restoring ACT relief on dividends and abolishing stamp duty on share dealing. The funding issue needs to be addressed before the Government considers measures such as the reduction in the value of pension rights. It must be careful, in particular, to ensure that private pensions do not suffer the decline in value which has beset basic state pensions”, said John Davies.