Call for huge pensions shake-up

THE Government's own pensions watchdog has blasted the state of the pensions industry in Britain and warned that it is heading for the same kind of chaos as the railways.

It calls for a root-and-branch shake-up of the industry that would see the end of personal pensions and stiff penalties for the mis-selling of occupational schemes.

According to Malcolm Mclean, chief executive of the pensions advisory service, the Occupational Pension Schemes Advisory Service (OPAS), pension complexity is at 'ridiculous' levels and Government neglect means that public confidence in pensions is at an all-time low.

'Public confidence is at stake and must be restored,' said Mclean, in response to a Government review of the industry, which has been rocked by successive disasters over the past decade, most recently the Equitable Life fiasco. 'Successive Governments have failed to tackle the pensions issue,' he continued. 'Complexity in the pension system is now at ridiculous levels.'

Government itself is partly to blame, for enacting legislation that is not 'practicable, workable, comprehensible and written in clear English', the OPAS submission claims.

OPAS is calling for a cull not only of red tape but of the 'formidable' number, range and type of pensions schemes, as well as of the rules under which schemes are sold. Personal pensions should be abolished altogether, to be replaced by stakeholder schemes which should be open to all employees, OPAS urges.

The criticism will be taken seriously in Whitehall, where the state of the pensions industry has been regarded with increasing concern. Although OPAS is an independent body whose job is to help the public, it is staffed by pensions professionals and is grant-aided by the Government's Occupational Pensions Regulatory Authority.

According to Mclean, the schemes that should go include additional voluntary contributions, free-standing AVCs, section 32 policies, Self-Invested Personal Pensions (Sipps), and Individual Pensions Accounts. Consumer choice could be entirely satisfied by making all new schemes be one of three types - occupational defined benefit, occupational defined contribution or stakeholder.

Reports on the latest consultation will go to the Work and Pensions Secretary Alistair Darling in July and a separate review of tax legislation is being carried out for the Treasury by the Inland Revenue.

OPAS is also calling for much tougher regulation to be introduced, with the protection against mis-selling afforded to individuals by the Financial Services and Markets Act 2000 being made to apply to occupational pension schemes and sales to employers.