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Webb floats ‘money-back guarantee’ for workplace pensions

by William Robins on Sep 24, 2012 at 10:10

Webb floats ‘money-back guarantee’ for workplace pensions

Pensions minister Steve Webb has suggested a money-back guarantee could help reinvigorate workplace pensions saving.

Speaking at the Liberal Democrat conference, Webb said providing capital guarantees could help re-engage workers with pension saving.

'A money-back guarantee, protecting capital to provide greater certainty, that is something else I am keen to work on,’ he said.

Webb said he had had 'chilling' conversations with employers who say they will scrap their high quality pensions provision because workers are not interested in them. He said he had a number of 'wacky ideas' on how to improve workplace pensions engagement.

'Why would employers spend money on decent pension provision when it’s not engaged with? How do we solve that conundrum? Employers must be able to recognise a good quality scheme and then be able to communicate that,’ he said.

'I have some wacky ideas about how to reinvigorate workplace pensions provision and I will put some of these forward at a later date.'

However Standard Life chief executive David Nish warned a capital guarantee would be expensive and urged Webb to consider linking workplace pensions to infrastructure investment instead.

'The money back guarantee is a great concept, but capital would be required, and how does that feed in to other parts of the pensions system? We need to talk about infrastructure funding. We could get a beautiful. attachment between employer savings and infrastructure investment. You would think they could be aligned but the government is running scared'

22 comments so far. Why not have your say?

Bob Donaldson

Sep 24, 2012 at 10:47

A money back guarantee after forty years of saving is not worth a light. They keep coming up with ideas but it is either boots on the ground selling pensions that is required or absolute compulsion through the PAYE scheme and the sooner they realise that the better.

Don't they just get on your nerve having rethink after rethink - Just get on with something!

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Bob Donaldson

Sep 24, 2012 at 10:49

Second thought - Why would anyone save into a pension and then have to buy an annuity at current rates. If they don't destroy pensions through their insistence on low cost products they destroy the annuity by QE.

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Sep 24, 2012 at 10:53

Give me £100 now and in 40 years I will give you £100. What an absolutely brilliant idea. Think I will start a plan like that.

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Paul Barnard

Sep 24, 2012 at 11:02

Could Mr webb et al please do the sums, based on the average wage, the average mortgage, 2 kids, car etc and then tellus how much they think they have left over at the end of the month to "engage" with a pension scheme?

Thanks to successive governments, the workplace as a whole has worse pay and conditions than 20 years ago.

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Sep 24, 2012 at 11:19

So, give me your money and pay an additional charge of say 0.5% to 1% for a guarantee that in 40 years I will give you your money back or a very small growth. Wait, do these GUARENTEES not already exist?

Let’s think of another company that gave guarantees that no longer exists, Equitable Life, low charging contract with guarantees, that many Solicitors and Accountants recommended and put most of their own funds into. Where are they today?

You cannot guarantee anything, it is impossible, why do they insist on raising expectations beyond what is possible. Sorry, I just realised because they do not want to educate and do not want to tell the truth.

It is so simple to explain to the public, save hard, long term and your longest holiday maybe lovely, save last minute and a little and you will have a terrible retirement. Save the same amount all the way through you will have a small pension. Save sod all and you will be very cold and very hungry as the state will not be able to help in the future as they will have no money.

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John Burchett

Sep 24, 2012 at 11:20

"We could get a beautiful attachment between employer savings and infrastructure investment."

Why can't these people speak english.

Steve Webb, stupid idea and rubbish research.

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John Phillips

Sep 24, 2012 at 11:22

Another Loon escapes the asylum and is allowed to put his ideas into the public domain, only to prove how little the people in control of the financial wellbeing of the country know about life, the people they are supposed to represent and simple maths. I really despair about the future my grandchildren are going to inherit from these morons.

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Sep 24, 2012 at 11:23

hmm, money back guarantees on pensions. But as Bob and Tomis have said, thats not really very attractive over 40 years.... Well why not go one further and say that if you pay into the pension for the full term you will receive back a guaranteed minimum amount (investment plus some growth). You could call it the "basic sum assured". Then if you put the money into a pooled fund, the pension company could say look at what the assets have done over a year and then if they have done well "declare a bonus" and hold back some of the growth for the years things don't go so well (call it smoothing maybe?). Maybe at the end, they could do a sweeping up exercise and possible add some more as a "terminal bonus".

Sounds silly I know but it wouldn't surprise me if that is where we end up!

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Billy Burrows

Sep 24, 2012 at 11:24

Look on the bright side - if we can make pensions more attarctive then perhaps more people will save.

I welcome any ideas, no matter how wacky, if they increase the attractiveness of pensions

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Stuart Rathbone

Sep 24, 2012 at 11:28

Cui bono? And who pays?

More can kicking.

Just another politico unwilling to grasp the nettle and tell the electorate that going forward that they will be increasingly on their own and that they will have to pay.

Until the glorious day that the can hits the wall the politicos will get in, get out with their swag and hope it occurs on the next incumbents watch.

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Jonathan Kirby

Sep 24, 2012 at 11:42

Having just discovered a terminally ill client with a return of premiums pension from one of the old industrial branch companies, we have shifted heaven and earth to get him out of it before its too late.

Is that kind of plan really going to ignite interest from workers????

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I'm an IFA - get me out of here

Sep 24, 2012 at 12:19

I have an idea. Put the money under your mattress. It won't help you sleep at night but at least you might think your future retirement is safe.

Another Minister totally out of touch with reality. We should be use to it by now.

What about Pensions Simplification? Or have we already had that one?

Jokers the lot of them, past and present.

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Julian Stevens

Sep 24, 2012 at 12:31

You don't need wacky (a misprint perhaps?) ideas Mr Webb. You need to hold the Conservative party to its broken pre-election manifesto promise to fix all the damage done to the pensions framework over the past 25 years.

1. Restore Contributions Insurance,

2. restore life insurance as an integrated element of a PP (perhaps subject to the requirement of a minimum level of ongoing contributions to retirement benefits),

3. repeal the tax on dividend income,

4. scrap the LTA,

5. scrap the AIA,

6. scrap the punitive death tax on unspent funds in retiirement, allowing them instead to pass down into PP's for the nextt generation,

7. simplify input allowances to 30% of earnings with just one year carry forward,

8. find an alternative to the annuity trap (such as the Retirement Income Bond I've been banging on about for years).

If you cannot see that these are the things that really need to be tackled Mr Webb, then you're about as much use as a chocolate teapot.

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sol trader

Sep 24, 2012 at 12:46

Auto enrolment always had to be "guaranteed" by the taxpayer - as they are forcing consumers to take a risk without paying any attention to their attitude to risk or capacity for loss..

What concerns me is that the UK taxpayer will be providing the guarantee for largely overseas fund managers who appear to have obtained the "nest" mandate. Nice work if you can get it

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Philip Wise

Sep 24, 2012 at 13:03

Here's a radical idea. Ask people that advise clients what he could do to improve engagement.

People dont engage with pensions, largely because retirement isnt a realistic concept, particularly at conventional retirement ages. With life expectancy having increased, what is needed is some re-education and honesty from politicians (and employers?).

Rather than expecting a conventional retirement at 65, people need to have aspirations of a slow down into retirement, betweeen 65 and 75. This is affordable and realistic.

But I'm all for the government paying for me to take investment risk. It works with bank deposits and the £85,000 limit, where people happily stick money into Irish banks (through the Post Office) in the knowledge that others are taking the risk, whilst they get the return.

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John Brady

Sep 24, 2012 at 13:09

I would love to meet anyone that has not got more than their money back after saving in a legitimate pension scheme for 40 odd years.

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Sep 24, 2012 at 13:41

First of what about Direct Adviser Financial Transactions I know its what many politicians would think and agree with DAFT is the future.

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Eamonn Dorling

Sep 24, 2012 at 13:56

John Brady makes a good point, so if a valuable Guarantee (from a consumer and political point of view) can be underwritten by the tax payer - as return of net contributions is likely to be the square root of a very small number - let's bolt that on to our recommendations and get on with it - can't see the british car industry or any other - offering that sort of deal.

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Bob Donaldson

Sep 24, 2012 at 15:43

I'v e got to say it but Mr S Webb is a total and utter Pleb! - Sorry didn;t say that but I did get angry for which I apologise!

The song can be downloaded on Itunes shortly!

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Richard Hardy

Sep 24, 2012 at 16:24

Agree with 'I'm an IFA' - as long as it's a flame-retardant mattrass.

Agree with Julian.

This period reminds me of the seventies, I think Labour may be back at the helm of the rudderless ship in the next two years.

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Keith Cobby

Sep 24, 2012 at 16:27

Unless you are receiving higher rate tax relief or are in a good company scheme the pension is surely finished.

Why not take a very successful savings scheme - the ISA - and enhance it.

My suggestions are: reinstate the dividend tax credit, allow the full amount to be held as cash, and perhaps use the current tax relief given on pensions to provide a matching amount, eg 10% of the amount invested. This matching amount to be clawed back if withdrawn within say 5 years.

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j p

Sep 25, 2012 at 13:19

his real problems, other than whether it is real and if so the capital costs, are how it interplays with CC and AC and for that matter salary exchange.

Nonsense headline grabbing. Now a true money back guarantee ie we will give you the "cash", that is something else

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