For the last 22 months the FSB has endeavoured to do its very best to bring not only the stakeholder pension requirement to business proprietors' notice but also the general ethos of improved pension provision. It has done so because that was the legal requirement even though the Policy Committee disagreed with the fundamentals of the stakeholder regime as proposed.
Throughout the core group meetings held at the Department of Social Security and also with Pension Ministers, it became clear that the consultative process was moving along a very well-defined path.

On 26 September 2001, just two weeks before the 8 October deadline for stakeholder to be implemented by all companies employing five or more staff, yet another pensions review was initiated by the Secretary of State for Works and Pensions to 'simplify pensions legislation'.

The irony of the whole situation is that the FSB published a well-researched paper 22 months ago outlining a scheme that:

• Was simple to operate;
• Confirmed day one membership for every employee earning above the lower earnings limit (approximately £65 per week);
• Provided a bigger pension;
• Eliminated marketing and distribution costs without detriment to the life assurance industry; and
• Is capable of providing the benefits promised, given the long-term view and life assurance company co-operation.

There would be no extra charge to either employees or employers such as there is with stakeholder pension. There would certainly be no promise of an extra five per cent compulsory levy which is on the cards for Government to grab even more of our members hard-earned cash when stakeholder comes to a grinding halt and the Government's compulsory scheme is in place.
Stakeholder pensions were always destined to miss their target market because those who do not want to save will not save until they are ready to do so.

The main point is that people move in and out of employment and up and down the pay scales throughout their lives. The contributions paid in any year have got to buy benefits commensurate with that contribution and that contribution must be held over the long term for the individual that made the contribution. That individual will then have a pension in retirement that reflects their lifetime earnings.

The FSB model would have a totally independent governing body; a board of trustees made up of trade bodies, trade unions, specialists in personal and group pension arrangements, plus some consumer representatives who would give balance to the administration.
'With-profit funds' would be used to give mutual benefit to all those who have contributed by feeding profits back through the benefits provided. The FSB model shows that had our suggested methodology been used from 1978 to 1998, a surplus of some £332bn would have been generated for distribution in extra pension benefits. Instead, £44bn is unaccounted for.

The board of trustees would have governance to ensure that there was fair play and an absence of interference. Contributions would be collected through the Contributions Agency and distributed to assurance funds on a monthly basis. This system has been tried and tested over the past 14 years by way of the redistribution of SERPS rebates.
The FSB scheme would restore public confidence in the pensions industry, in assured funds, in government promises and, most of all, in the public's own ability through secure, certain, guaranteed facilities, to know that there is an income available to them after they reach retirement age.

For the full article, see page 24 of the December 2001/January 2002 issue