Chancellor's changes erode pensions incentives
19 June 2003
Successive Chancellor's changes to the pension system have increased the cost of securing a pension by over 25 per cent, according to Legal & General.
The pensions provider claims that, in order to secure £100 in a pension pot, the amount of monthly saving required is £78, the highest it has been since 2000, and an increase of 25 per cent on the £65 that a person needed to find in 1975.
Adrian Boulding, Pension Strategy Director at Legal & General commented, 'The cost of securing a pension has risen by over 25 per cent since 1975 and that is why we believe it is vital that the Government introduces incentives in order to make pension provision easier for people, today.'
Legal & General has calculated how the monthly cost to an individual to secure £100 in their pension fund has increased under the various Chancellors over the past 28 years. The amount went up by £5 under Nigel Lawson and has risen by £3 under Gordon Brown.
Adrian Boulding continued, 'Over the past 28 years Chancellors have progressively eroded the attractiveness of pension savings making it increasingly more difficult to find the extra funds required for pension funding.
'Successive Chancellors have reduced the financial tax incentives available on pensions which is why Legal & General is calling for a 'u-turn' and the introduction of fresh financial incentives to support individuals in their pension funding.
'The introduction of matching incentives will encourage people to review their pension planning and do something positive to ensure they are in control and on track to achieve the income they want in retirement.'
A net pension contribution of £40 a month, which Legal & General points out many individuals could afford, would result in a net monthly contribution of £120 with the matched contributions from both the Government and their employer. With contributions at this level it is possible for individuals to build realistic pension funds for their retirement, particularly if there is 20 or more years to go before they retire.