HISTORIC PRESS RELEASE : Individual Pension Accounts Helping more people Save for the Future [July 2000]
The press release issued by HM Treasury on 11 July 2000.
Increases of up to 30 per cent in their retirement nest egg and greater freedom in their working lives could be possible for some personal pension savers using the new individual pension account (IPA), Economic Secretary Melanie Johnson said today.
The new IPA will particularly benefit those on moderate incomes, including part time workers, and those taking family or educational career breaks. It will enable the millions of pensions savers to have better, more flexible pension arrangements, which will be ideal for use with stakeholder pension schemes.
Miss Johnson and Social Security Secretary Alistair Darling today published a joint paper outlining the key features of the IPA, and seeking views on a small number of issues remaining following earlier consultation with pension providers and pension savers’ representatives.
Welcoming the paper, Miss Johnson said:
“IPAs will offer many thousands of personal pensions savers new freedom to plan and diversify their working lives They can take time off work or change jobs, possibly several times, without losing out on retirement savings as a result.
“IPAs will be suitable for many people on moderate incomes. They may be particularly helpful to women, who are more likely to take part time employment or to take career breaks when starting a family, or for those returning to education or training courses. Both those individuals and the economy will gain from the benefits IPAs offer.
Pointing out their suitability for long term pensions planning and use with stakeholder pensions, Mr Darling said:
“We want more people to save for their retirement. The IPA complements other reforms such as the new stakeholder pensions. We wanted everyone to have the right options for them and the IPA gives more choice for saving.”
Both IPAs and stakeholder pensions will become available in April 2001. Case study examples of the potential to enhance the value of pensions for those seeking flexibility in their working career are attached.
The advantages of IPAs in pensions saving include a simple charging structure, spread investment risk, security, transparency, and better understanding and confidence in equity investment. The IPA concept was based in part on the popular and successful US s401(k) savings scheme, which has encouraged savings generally, and equity savings in particular.
The development of IPAs marks a key stage in delivering the Government objective of providing secure, flexible and value for money pensions. The paper published today shows how IPAs will work and the steps the Government will take to ensure their availability when stakeholder pensions are launched in April next year. The areas covered by the joint Treasury and DSS paper include:-
- the IPA concept
- how it works in practice
- moving pension scheme with IPAs
- using IPAs for stakeholder schemes
- the legislative framework
- points where further views would be welcome.
Movement of IPA investments between savings schemes will be made easier by the introduction of a relaxation of stamp duty reserve tax rules to put IPAs on the same footing as pension savings in life insurance based products.
