West MP Steve Webb's plan to keep pensions banker-proof
People should be able to insure their pensions against bungling bankers devastating their value, says Pensions Minister and West MP Steve Webb.
He believes it is the best way to encourage workers to keep saving towards their retirement.
His intervention comes before the Government publishes its long-awaited proposals to reform the social care system, which are expected tomorrow.
Since banking and City failures caused the credit crisis five years ago, the FTSE 100 share index has fallen by 15 per cent, meaning a £100,000 pension pot has lost £15,000 of its value.
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Mr Webb, Thornbury & Yate Liberal Democrat MP, said: “People don’t really want to work for a year and get a pension statement showing their savings have gone down not up.”
He hopes that more confidence will be restored in pensions this autumn, when more than ten million will automatically be enrolled in workplace pensions. I am convinced people have a huge appetite for certainty about their pension savings and this demand will drive the shape of pension provision in the future,” he said.
“I want industry to innovate and think hard about this.
“With the dawn of automatic enrolment the market is growing – so now is the time for the pensions industry to look at the market gap in relation to affordable guarantees and provide the products consumers are seeking.”
Mr Webb was meeting senior figures from the pension and insurance industries yesterday, as he works towards a consultation paper later this year.
The recession has also put people off saving for their retirement, and the proportion in a workplace pension has fallen below half for the first time in at least 15 years.
The Office for National Statistics says when it began keeping records, in 1997, 55 per cent of employees were in a scheme, but that has dropped to 48 per cent.
And the National Association of Pension Funds has found 54 per cent of workers are not confident about pensions compared with other ways of saving.
Mr Webb said: “As part of the options we offer people, we want greater certainty and guarantees or insurance to be on that list.
“Auto-enrolment is our best chance of getting people into saving and if they are put off by fear of risk, volatility and uncertainty, it is very hard to get them back again.”
However industry experts have warned that guaranteed ‘money-safe’ products could be expensive, with high charges.