Stakeholder pensions have become “tax dodge”, claims TUC
Stakeholder pensions, which were introduced by the Government to attempt to persuade those on medium and low incomes to save for their retirement, have instead become a tax dodge for the rich, according to the TUC.
Since 2001 employers with more than five employees, and no occupational pension scheme, have had to offer a stakeholder pension. These saving plans have their charges capped at one per cent in an attempt to encourage those on low incomes to save. But, this is set to rise to 1.5 per cent from April 2005.
However, there is no requirement for employers to make any contribution to the pension scheme. The TUC have long been arguing that without an employers’ contribution people will not save. It argues instead for a return to high quality occupational pension schemes.
Previously released figures have shown that the average yearly contribution of all stakeholders is just under £1000, but the TUC’s analysis of Inland Revenue statistics suggests that there is a wide discrepancy in contributions among different groups.
It claims that the average contribution to an employee’s stakeholder pension is just £720 a year, whereas contributions paid into non-employee stakeholder pensions average nearly £2000.
The TUC claims that this second group is largely comprised of “children or spouses of the well-off” who are taking advantage of the tax breaks available.
Anyone under 75, and not earning more that £30,000 a year, can take out a stakeholder pension with full tax advantages. The TUC suggests that they wealthy are using this to provide stakeholder pensions for “any non or low earners in their family – such as children, students and non-working spouses” and so attracting considerable tax advantages.
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.”
The TUC’s figures suggest that only 680,000 employees are contributing to a stakeholder pension, around 2.6 per cent of the work force, and it argue that many of these are top-ups for existing occupational pensions.
It claims: “This is further evidence of the failure of stakeholder pensions with no employer contribution to encourage the take up of pensions by the lower paid.”
Continuing, Mr Barber said: “There is nothing wrong with stakeholder pensions in principle, but we now know conclusively that without an employer contribution they will make little or no impact on our pensions crisis. On the other hand they are clearly a good way for the wealthy to avoid paying tax.”
