Product category:
Pensions and retirement
News Release from: Fidelity International | Subject: Retirement plan
Edited by the Insidemoneytalk Editorial
Team on 09 January 2008
Fidelity International urges Government
to review as yet unaddressed aspects of
the Pensions Bill
Employer contribution levels not set out clearly
Master Trusts could add extra benefits layer and increase employers' administration burden No role for risk sharing, such as 'DB Lite' Individual procrastination remains a major risk
This article was originally published on Insidemoneytalk on 20 Feb 2007 at 8.00am (UK)
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Simon Fraser, President of Institutional Business at Fidelity International Limited, raises concerns about issues yet to be fully ratified in light of today's Second Reading of the Pensions Bill: "We recognise the Pension Bill's positive goal of providing everyone with better retirement savings, but today's Second Reading underlines some key factors which remain unaddressed.
Despite the Government clearly setting out employer contribution levels at 3% of gross earnings (with a phasing in over three years), the point is yet to be made explicit in the Bill leaving employers potentially unsure of their future responsibilities and therefore hampering their ability to plan effectively for their introduction.
"Furthermore, the proposal to embrace the Master Trusts vehicle could lead to administrative headaches for businesses by adding an extra structure of retirement benefits.
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This seems to stray from the original intention of 'complementing rather than competing with existing provision".
"Recent comments* by the chief executive of the Personal Accounts Delivery Authority suggest Personal Accounts could slip beyond 2012.
If anything, this underlines that individuals and companies should not wait before putting retirement planning in place - it is common sense to start early because the cost of delaying saving can reduce income in retirement by a vast amount**.
"In addition to what is covered by the Bill, we would strongly urge the Government to explore risk sharing schemes within the sphere of occupational pension provision.
Fidelity has been lobbying for a new type of Defined Benefit scheme: 'DB Lite'*** which, by introducing risk sharing, could act as a potential middle ground between the hard wired existing defined benefit schemes and defined contribution plans.
Risk sharing would seek to promote a more realistic approach to providing retirement benefits for members and providers in today's working environment.
We believe that the Government should be doing everything within their power to protect good quality occupational pensions already in existence." Fidelity International Limited ('FIL') and its subsidiary companies serve the major markets of the world by providing investment products and services to individuals and institutional investors outside the US.
The FIL Organisation manages a total of £148.1 billion of assets****.
* Source: BBC Radio 4 Moneybox, 29.12.07.
** Fidelity estimated that a 30 year old who delayed their retirement planning (by investing the £3,600 per annum proposed for Personal Accounts) until 2012 could miss out on £116,000 when they retire at 65.
Source: Fidelity, 18.06.07.
*** DB Lite is a model developed by Fidelity that gives schemes linked to pay and service a future but avoids the high costs of current arrangements.
Future costs for the employer could be cut by up to a third, while scheme members continue to enjoy a DB pension.
**** Source: Fidelity, 30.09.07.
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