Lisa unveiled as pension of future

PLANS FOR a flexible pensions investment vehicle, aimed at encouraging greater savings for old age, were unveiled yesterday by the Government.

The proposal, which Treasury officials said could be combined with Labour's earlier proposals for stakeholder pensions, will offer a "transparent" tax-free wrapper within which pooled investments can be held.

The new vehicle, which officials emphatically denied will be called a Lifelong Individual Savings Account, or Lisa, will allow savers to hold "suitable" funds currently sold by unit and investment trust groups. It would be aimed at individuals who do not have occupational pension schemes or cannot afford the high fees often charged by personal pensions providers.

"It is for the very large chunk of people for whom it would be useful to have a pension to move around with, who have modest earnings around or even below average incomes, who can put small amounts or lump sums away for their retirement," one official said.

Despite its stated aims, some pensions experts wondered whether the new vehicle offered anything not available by other means.

Peter Tompkins, from the Institute of Actuaries pensions board, said: "I do not think there is a lot of beef there. It is really about an investment structure and we are rather mystified that many of the things they said would apply here already do with existing schemes."

While the vehicle was aimed at extending the flexibility available under the Government's stakeholder proposals, published in December, it could also be used for occupational pension schemes and even personal pensions, it was claimed yesterday.

A ceiling on charges for the new vehicle will be imposed and the Treasury has made clear it would like fees to be a modest annual percentage with no or low initial and exit fees.

Alistair Darling, Secretary of State for Social Security, said the new mechanism would ensure the success of stakeholder pensions, which are designed to help middle-income earners save for retirement and avoid being dependent on welfare benefits.

"Stakeholder pensions are a crucial part of our plans. They will provide the secure, flexible and value for money pensions that those on middle incomes lack under the current system," Mr Darling said.

Schemes will be regulated by the Financial Services Authority, the City watchdog. The way they look after pension-plan holders will be overseen by the Occupational Pensions Regulatory Authority.

Investors will be able to move from scheme to scheme, check the value of their funds on a daily basis and even transfer them from employer to employer. But officials yesterday were unable to say whether an employee with funds in one "pooled" investment vehicle would be able to ask his employer to contribute to that, rather than that company's existing one.

The Treasury added that it was seeking suggestions for a more appropriate name than Lisa, as the vehicle has been dubbed so far, reflecting that they are designed for retirement.

Duncan Mackechnie, chief executive at Direct Line, the telephone-based financial services group, said he backed the key thrust of yesterday's proposals: "In broad terms it is to be welcomed especially its emphasis on adding value to most people's pensions."

However, Angela Knight, chief executive at the Association of Private Client Investment Managers and Stockbrokers, said last night: "We are concerned that the Government has said nothing about direct equity investment in these proposals."

Outlook, page 18

HOW TO DANCE THROUGH THE PENSIONS MAZE

The State

Pension

Type of

product

Pays out at 65, up to a maximum of pounds 64.70 a week for a single person, pounds 103.40 for couples at present. The exact amount depends on National Insurance Contributions

For

It is the basic safety net for everyone

Against

The amount paid out is far too low

State Earnings-Related Pension Scheme (Serps)

Labour's brave attempt to link pensions partly to earnings. Steadily whittled back by the Tories, Serps will be phased out in the next few years

It offers some link between wages and pensions. A good try

Will pay out derisory amount for most. The scheme is also judged too expensive

Occupational pension

Offered by companies to their employees. Pensions are either linked to service or are investment-linked funds used to buy annuities. Benefits vary widely

It can ensure a decent income in retirement

Not all employers pay enough into their schemes, leaving their staff in the lurch

Additional Voluntary Contributions (AVCs)

A pension top-up scheme which companies with occupational pensions must also provide. It allows you to beef up your retirement income if you've not made enough contributions before now

It helps people boost their pensions relatively cheaply

Usually not very much investment choice

Free-Standing Additional Voluntary Contributions (FSAVCs)

A private version of the above, offered mainly by life insurance companies

A wide choice of funds; allows you to choose your own retirement date after 50

They are often so expensive that they deliver extremely poor value

Second State Pension (SSP)

Labour's replacement for Serps (although the benefits of Serps accrued to date will still apply)

An extra pounds 50 a week for those earning up to pounds 9,000 a year, then based on a sliding scale

This is still woefully inadequate. Serps did offer some people more

Stakeholder pensions

A simplified type of pension, which can either be offered by employers or other groups, including trade unions. Aimed at helping those earning between pounds 9,000 and pounds 20,000

Simple, cheap, allows more flexible contribution limits than present personal pensions

Anyone who wants to pay more than pounds 3,600 a year into one won't be able to.

Not-the-Lifetime Individual Savings Account (Lisa)

Aimed at making it easier to invest in unit and investment trust- style pooled funds. can be either a stakeholder, personal or occupational scheme

Hopes to simplify pension funds ad make them cheaper.

No big deal. Most of the things it wants to do can be done under the existing system.