Savings Archives - QROPS Review

When the details for the new pensions regime became clear we warned that the real reason behind the change was to generate extra tax revenue for the government.

While it was pitched by George Osborne as a brave new pensions world of freedom and flexibility, new figures have now emerged showing the true picture.

New research out today shows the full extent of the windfall for the Exchequer in just the first 3 months of the new system.

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Most people have a defined contribution (also known as money purchase) pension scheme where the saver will contribute to a pot of money that will be used to provide an income in retirement. However, there are other schemes which can be referred to as defined benefit or final salary schemes.

This form of scheme is almost always an occupational pension scheme, funded through employer and employee contributions. However the pension saver does not have their own, allocated account.

Rather, there is a formula which states what their pension is likely to be on retirement, normally linked to a percentage of the last salary they’ll earn, combined with how long they’ve worked for their company. Traditionally, these schemes were seen as very safe.

But new research suggests that one such final salary scheme, that of FTSE 100 retailer J Sainsbury, may be dangerously underfunded to the point where it may harm the supermarket’s long term performance in Britain’s grocery price war.

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A recent industry report has claimed that a retirement income of £15 000 is necessary to provide a “comfortable” standard of living.

However, the National Employment Savings Trust reported that there is no “happiness benefit” above an income of £40 000 per year.

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