Crisis over pension plan

by John d'Arcy



An element of compulsion in making personal pension contributions is being backed by the B&CE benefits company, which is set to introduce an industry-based stakeholder pension scheme in April of next year.

B&CE pensions chief John Jory said: "Stakeholder pensions won't solve the country's pension crisis. Only compulsion on individuals to contribute can do that. And we firmly believe this should happen."

Jory said stakeholder pensions could turn out to be a "damp squib." Alternatively, within a few years, they could become the major pension product and the only type of personal pension.

He said the B&CE was very enthusiastic about stakeholder pensions. "We believe they offer a very real opportunity for middle earners, such as construction industry operatives, to build up a pension fund that will provide a meaningful income in retirement," he declared. "We are so enthusiastic that our stakeholder pension will have no charges for construction workers in the first five years. We want to do everything possible to encourage members of our industry to make adequate pension arrangements."

Negotiations between employers and unions on the level of contractor contributions to the new scheme will continue over the summer. But Alan Black, national secretary of the GMB, suggested that anything less than £5 would be meaningless.

Current employer contributions to the B&CE's lump sum retirement benefit scheme are set at £1.90.

Jory said the employer-funded current scheme was only ever designed to provide a modest tax-free lump sum. And this scheme would probably be replaced by the new, stakeholder product.

"We are looking at the various options to us to ensure that this would disadvantage no one, particularly those people nearing retirement," he said.

The benefits company was also lobbying to ensure that the 200,000 subscribers to the lump sum retirement benefit would not have to complete individual application forms to transfer to the stakeholder scheme.

He continued: "Most companies are looking to be able to administer stakeholder pensions through the internet and have direct links to their payroll systems.

"Most companies share our enthusiasm and see stakeholder pensions as perhaps becoming a longer term replacement for occupational pension schemes, particularly final salary schemes. There are a number of potential attractions in this for employers, including reduced administration and reduced costs."