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The BBC's Rory Cellan-Jones
"The idea is to encourage more people to save"
 real 56k

The BBC's Andrew Verity
"Twenty-five million people could benefit"
 real 56k

Friday, 6 April, 2001, 07:20 GMT 08:20 UK
New pensions go on sale
An elderly woman collects her pension
The basic state pension will not provide enough for many people to live on
UK workers can now save for a nest egg for their retirement in a new cost-effective way, as banks and insurances begin selling so-called stakeholder pensions.

The long-awaited new pensions are the result of a government initiative aimed at encouraging those on lower and middle incomes to save more for retirement.

An ageing population means the basic state pension is unlikely to provide enough income in retirement for most of today's workers.

Companies with five or more employees not offering their own pension scheme will be required to provide workers with access to a stakeholder pension within six months.

Stakeholder pensions
Low-cost
Flexible contributions
Tax efficient
Aimed at low-middle income earners
Not intended for those with access to company pensions
For consumers, key features of stakeholder pensions include low costs, flexibility over contributions and tax efficiency.

They are intended for those who, for whatever reason, do not have access to company pension plans.

Any employer contributions to a company plan will probably outweigh the benefits of a stakeholder pension, financial advisers say.

Employers unaware

The introduction of stakeholder pensions has helped accelerate reorganisation within the pensions industry.

The cap on charges has encouraged providers to cut back on travelling salesforces and expand internet and telephone sales and customer service operations.

Business groups have given the new products a mixed reception. The Confederation of British Industry has said they are a good idea but it is concerned over the administrative burden on small businesses.

Surveys have suggested many employers are unaware of their obligations over stakeholder pensions.

Some critics have said the tax efficiency of stakeholder pensions means they will most benefit relatively wealthy people.

Although those with a company pension scheme earning 30,000 a year or more are not permitted to have a stakeholder pension, they could contribute to stakeholder schemes for their spouses or children.

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