Cloud remains over pensions and ISAs

Bestinvest has attacked the government's stakeholder pension schemes and Individual Savings Accounts (ISA), feeling people are failing to save enough

15:45 29 July 2004

Bestinvest has attacked the government's stakeholder pension schemes and Individual Savings Accounts (ISA), feeling people are failing to save enough for retirement.

It believes that with the current Treasury policy the government has a greater chance of turning water into wine than regenerating long-term savings.

It comes in response to yesterday's Treasury Select Committee report into restoring public confidence in long-term savings.

"I have no doubt that unless the government radically changes their approach to attracting long-term savings and regulating the financial services industry, future generations face a far from comfortable retirement," said John Spiers, Bestinvest managing director.

He added: "It's a strange state of affairs when the most attractive savings vehicle currently available, the Venture Capital Trust, is relatively high risk and most likely to attract wealthier individuals."

Inland Revenue figures from April 2003 showed stakeholder pension members were only contributing an average of 110 per month per member (with a quarter paid via employer contributions).

Similarly, ISA sales are looking less that healthy as a preferred retirement option. IMA figures show net fund ISA sales in June 2004 (123.2 million) were 58 per cent lower than June 2003 (293.6 million).

The government's decision to reduce the tax incentives for pensions and stocks and shares ISAs appears to have exacerbated the problem, as have the repeated mis-selling scandals, and the reduction of the annual ISA allowance from 7,000 to 5,000 next year.

Justin Modray, Bestinvest head of communications, believes the Treasury Select Committee's report, which calls for greater transparency for savers, will do "little to improve the perilous state of the financial services industry."