date: May 17 2004

embargo: 00:01 hours Thursday May 20 2004

Attention: personal finance, industrial correspondents


Stakeholder pensions have failed to plug pensions gap

Stakeholder pensions have failed to plug the gap caused by the retreat from good occupational pension schemes according to TUC research published today (Thursday) that shows that less than three in a hundred workers have taken one up. And the small number of workers who have taken out a stakeholder pension are saving less than half the amount they need to secure a good pension when they retire, says the TUC.

Experts say that people need to save 15 per cent of their salary throughout their working life if they are to retire with a reasonable pension at a reasonable age. This means that an employee on the average wage of £25,000 a year needs to put by £3,750 a year. Yet the average contribution to a stakeholder pension from both employee and employer in employer-sponsored stakeholder pensions is just over £1,000 (£1,081) - a shortfall of more than £2,500.

Take-up of stakeholder pensions has also been extremely poor with only three pensions taken out for every hundred people at work. The proportion of employees with stakeholders will be even smaller than this as non-employees such as children and non-working spouses can also take out stakeholder pensions as tax-free investments.

Stakeholder pensions were introduced by this Government as a simple low-cost easily-transferable personal pension. Employers with more than five staff who do not offer a better quality pension scheme must provide a stakeholder, but are not compelled to make any contribution to the stakeholder pension.

TUC General Secretary Brendan Barber said: 'There is nothing wrong with stakeholder pensions in theory. They are a good investment for anyone who does not have a quality occupational pension. But these figures show that they are failing to take up the slack caused by employer retreat from occupational pensions linked to pay. Few have taken out a stakeholder, and those that do are not paying enough into them.

'We are building up a big pensions crisis for the future as fewer and fewer people in the workforce have proper pension arrangements. Yet when employers contribute, the evidence shows that staff do too. That is why we need pensions compulsion.

'That will be a central demand of our pensions march and rally on June 19 in London.'

Statistics

Average earnings 2002-2003: £25,170

1% average earnings: £251.7

15% average earnings: £3775.5

Number of people in employer-run

stakeholders 2002-2003: 620,000

Employer contribution: £340m

Employee contribution: £310m

Rebates: (stakeholder schemes that are contracted

out receive a government subsidy) £20m

Total contribution to

employer scheme: £670m

Average total contribution

per member: £1080.5 per year,

£90 per month

Average contribution as % of average earnings: 4.3%

Average employer contribution as % of average earnings: 2.2%

Average employee contribution as % of average earnings: 2.0%

Shortfall between 4.3% and 15%: £2695 per year,

£224.5 a month

total working population GB 27,542,000

stakeholder pensions as a proportion of workforce 3.0%

Sources:

2003 New Earnings Survey http://www.statistics.gov.uk/downloads/theme_labour/LMT_NES2003ARTICLE_FINAL.pdf

Inland Revenue table 7.5 - Stakeholder pensions for individuals: Numbers of members and contributions by type of scheme

http://www.inlandrevenue.gov.uk/stats/pensions/table7-5.pdf

Figures for regional shortfalls and take up are available on request

Notes to Editors:

Details of the TUC’s pensions rally can be found at http://www.tuc.org,uk/pensionsrally

Advice for prospective staff on whether a new employer provides a good pension and other pensions advice can be found at the TUC’s world of work website http://www.worksmart.org.uk/

- All TUC press releases can be found at www.tuc.org.uk

- Register for the TUC's press extranet: a service exclusive to journalists wanting to access

pre-embargo releases and reports from the TUC. Visit www.tuc.org.uk/pressextranet

- A series of TUC rights leaflets are available on our website and from the know your rights line 0870 600 4 882. Lines are open every day from 9am-9pm. Calls are charged at the national rate.

Contacts:

Media enquiries: Ben Hurley 020 7467 1248 or 07626 317903 (pager) or email bhurley@tuc.org.uk

Media enquiries: Liz Chinchen 020 7467 1248 or 07699 744115 (pager) or email media@tuc.org.uk

Press release (700 words) issued 20 May 2004

This page http://www.tuc.org.uk/economy/tuc-8058-f0.cfm
printed 24 May 2012 at 00:49 hrs by 38.107.179.230