The
influential peer Lord Myners has said the pensions market should be overhauled,
as final salary pensions have been "destroyed". Read what else was
said here.
By Lana
Clements
Lord Myners,
the former city minister, has written to George Osborne to propose the pensions
market be overhauled, according to reports in the Daily Telegraph.
The chairman
of pension fund manager Gartmore Group said the "rather good
development" of final salary pension schemes had been
"destroyed" and feared this was irreversible.
He blamed the
death of the pensions partly on parliament for burdening the schemes with extra
requirements. In large part, though, final-salary retirement is just too
expensive for companies to run.
Lord Myners
said the private sector, now largely on defined-contribution schemes, also known as money-purchase, was being
stung with hidden fees leading to low retirement income. In an effort to help,
he said the government should enter the annuities market to challenge the
insurers that currently dominate the sector.
Offering
low-cost competition would tackle the "market failure" of high fees
cutting into people's pensions.
The proposals
would help those with smaller pension pots of £10,000 or less, according to
Lord Myners, who said: "Fees are too high and there is little competition
in the annuities market, particularly for people with small pots."
People who hit retirement under defined-contribution
schemes usually buy an annuity with their pension's savings. But in the last
couple of years, annuity rates have been declining rapidly, meaning annual
income for pensioners is also decreasing. Meanwhile, the cost of living
continues to rise.
Lord Myners argues that people should be able to buy
their annuity from the Treasury's Debt Management Office (DFO).
"Here is a novel way of funding the government's
debt in a new way that also addresses the social need of addressing the
uncompetitive pensions industry," he said.
