Stakeholder pensions 'for well-off'

13 April 2012

STAKEHOLDER pensions have failed to reach their target audience - low paid workers - and are instead being taken out by the children and partners of the well-off, the TUC said today.

The group said Inland Revenue figures showed that during the year to 5 April, 2002 an average of £950 was paid into the low-cost pension schemes.

But it warned that this figured masked the fact that employees were contributing an average of just £720 a year to the pensions.

At the same time stakeholder pensions taken out by non-workers, many of whom are thought to be the children or spouses of well-off individuals, had 260% more paid into them at an average of £1,928.

The group said in April 2002 there were around 840,000 stakeholders in existence, some 680,000 of which were taken out by employed people.

But the TUC said many of these were likely to be top-up pensions taken out by people who were already contributing to occupational schemes.

It added that around 10,000 people who were already receiving a pension were contributing an average of £2,740 a year to a stakeholder, suggesting they had been taken out by relatively well-off younger pensioners who were keen to take advantage of the tax breaks they offered.

It also found that 10,000 unemployed people had stakeholders which had an average of £2,260 paid into them.

A further 20,000 stakeholders were held by children, with average annual contributions of £1,320, while full-time students with the pensions paid in around £1,320.

A stakeholder pension can be taken out by anyone under 75 who is earning less than £30,000 a year.

But while the pensions were intended to encourage low-paid workers to save for retirement, it is thought that many of them have been taken out by well-off people for their partners and children.

TUC general secretary Brendan Barber said: 'These figures show that stakeholder pensions are a bigger failure than we thought.

'They were meant to get the low paid saving, but few have been taken up, and, as these figures show, contributions to employees' stakeholder pensions are even lower than previously estimated.

'Many employee stakeholders will be people saving on top of an occupational pension. This is to be welcomed, but was never meant to be their main purpose.'

He added that unless employers contributed to workers' schemes, stakeholders would have little or no impact on the pensions crisis.

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