Pension shake-up essential after election, insurance chief insists

THE next government needs to simplify pensions and offer greater reassurance that savings contributions will be protected, Friends Provident chief executive Trevor Matthews has claimed.

Matthews, formerly chief executive of the UK life and pensions business at Standard Life, called for the creation of an independent body to lead a new long-term savings strategy after next month's election.

He claimed that the election offered an opportunity for a radical rethink of the savings culture in the UK, which he said had suffered from an incoherent approach to pensions policy at government level.

"Public policy has to start giving people the freedom and confidence to become self-reliant and this means our next government must remove the barriers to saving and instead start offering incentives for more people to save," Matthews said.

A consistent approach to policy shaping within the pensions industry in the UK has been "seriously lacking", according to Matthews, who called on the next government to commit to less regulation and more simplification. "People need reassurance that their savings contributions will be protected."

Amendments to the government's flagship National Employment Savings Trust (Nest) scheme, beginning in 2012, would support that reassurance, according to Matthews. Under Nest, workers aged over 22 and earning more than 5,035 a year will be automatically enrolled into their employer's existing pension or into the Nest scheme, with the right to opt out.

But Matthews said that for Nest to succeed, the next government would need to remove means testing to enable people to contribute to Nest or a qualifying pension scheme without fear of seeing their benefits eroded as a result.

"It also means empowering employers to give their employees guidance on retirement saving within a regulatory safe harbour that stops them being paralysed by worries over future legal actions," said Matthews.

"Above all the next government has to stick with pensions simplification principles and, take politics out of pensions. We need an independent body of professionals not politicians responsible for developing a long-term savings strategy."