Employees get chance to insure savings

Pensions Minister Steve Webb has urged industry experts to seize on the gap in the market for innovative pension products which might include some form of cost efficient guarantee, and offer people a greater degree of certainty on what their pension income could be.

He said: “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.

“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 pensions industry to look at the market gap in relation to affordable guarantees and provide the products consumers are seeking.”

The move comes from fears that unless pensioners can be guaranteed their money is safe, they will be deterred from saving.

The squeeze on household incomes in the light of the recession has also put people off saving into a pension.

Official figures earlier this year showed that the proportion of people in a workplace pension has fallen below half for the first time in at least 15 years.

Just 48 per cent of employees were in a scheme, compared with 55 per cent when the records began in 1997, Office for National Statistics figures revealed.

A study by the National Association of Pension Funds (NAPF) found that more than half of workers (54 per cent) were not confident in pensions compared with other ways of saving.

The Government is trying to tackle the pension savings crisis with the automatic enrolment of between nine and 10 million people into pension schemes, beginning in October.

But almost four in 10 of those eligible for auto-enrolment told the NAPF survey that they would struggle to pay into the scheme, while a third said they would quit the new pension.