Jeff Salway: McFall report adds nothing new to the pensions debate

MONDAY morning's headlines warned us that millions face pension poverty unless there is urgent action to reform the UK's pension system.

They were stories of the bear-performs-its-bodily-functions-in-the-woods variety that could have been written at any time in the past decade. In fact, they have been, on a regular basis.

This time they concerned a report that could also have been written at any time in the past few years, such was the re-hash of accepted wisdom. People aren't putting enough aside. Debt is inhibiting savings levels. Successive governments have undermined pension savings, as has the financial services sector.

You've probably heard it all before, but the Workplace Retirement Income Commission, led by the redoubtable Lord McFall, offered a timely reminder. It's full of common sense, both in the diagnosis of the problem and the proposals. But there's nothing new.

Apparently people saving into pensions aren't saving enough - something every survey on the topic in recent years has made very clear; charges are too opaque; too many people get poor-value annuities because they're not shopping around; the 8 per cent minimum contribution set for the automatic enrolment reforms coming into force next year is too low; people with small pension pots are given too few decent value options; employers need to be incentivised to offer advice on pensions; trust in pensions is low.

All of this is true, of course. And the report does identify the separation of politics and pensions - which this column has been banging on about for some time - as key to re-establishing trust in pensions. That employers should be given greater incentive to offer advice on pensions is also absolutely right.

Yet, churlish as it is to criticise a study with which it's very difficult to disagree, I can't help but wonder what the point was. It feels like someone who hasn't studied pensions in any detail in the past ten years has been asked to investigate the problem in the hope that fresh ideas would produce fresh ideas. Much of the work aimed at redressing these problems is already in progress, however, most obviously auto-enrolment. There are also positive signs that the annuities market is being reformed to make it more likely that people get a decent deal on retirement.

So, it's difficult to see what value McFall's report adds to the debate. It merely highlights the same concerns that countless reports and industry pundits have been raising for years. That may be reassuring, but it doesn't take us any further.

If YOU once opened a child trust fund (CTF) but want to take advantage of junior individual savings accounts when they launch in November, tough luck.That was the unhelpful message from the government when it revealed that the annual investment limit for the new products, effectively replacing CTFs, would be set at 3,600.

It revised the figure up from 3,000, yet ignored calls to allow CTF savers to open junior Isas (Jisas). There's a knack of undermining every good deed with pointless caveats that they must teach only in politician finishing school, and this is yet more proof.

Jisas make a lot of sense, but they also possess some of the flaws that blighted CTFs, not least the lack of parental control both during the Jisa term and at maturity. That the average Jisa beneficiary will transfer the fund into a normal Isa at 18 is a nice idea, but naive. I'm just about young enough to remember what I would have done with it at that age - and there wouldn't have been much in the way of long-term benefit.

If parents and grandparents are going to divert their hard-earned money into any account for up to 18 years, they're entitled to a greater say in the investment. Yet inheriting the biggest flaw of CTFs is just one problem. The other is that anyone with an existing CTF will be left behind when Jisas hit the market, as they will be barred from opening a Jisa or even transferring their CTF into a Jisa.

They will, instead, be stuck in a market in which the deals are no longer competitive, creating a two-tier situation where those paying into a CTF are getting returns inferior to those in the Jisa market from which they are excluded.

What's most frustrating about this is that Jisas have the potential to build on the foundation laid by CTFs. The ability for Jisas to convert into conventional Isas could have a real impact on long-term savings levels among younger generations, especially given access to basic advice at the point of transfer.

But the absence of parental controls means they may ultimately prove yet another wasted opportunity.