Your money: Make pensions better and then make us buy one

We need flexible pensions that give people access to their cash before retirement in difficult times

We've gone from famine to feast in pensions. After months of inaction, Malcolm Wicks was appointed the new pensions minister and the Government issued its response to the Green Paper - all within days of each other. And now we have details of another pensions review.

Last week, the Government announced an independent commission to debate the merits of compulsory pensions. Such a review has been avoided in the past because compelling people to save for retirement doesn't rank highly in the vote-winning stakes.

Yet this can't happen soon enough. Dame Sheila McKechnie, director of the Consumers' Association, says people want to retire at 57, on average, on a pension worth three-quarters of their final salary. But the state pension is falling in value in relative terms, employers' contributions are dropping as they shift away from final salary schemes, and more than half of us don't contribute to a pension. The result is a huge gap between expectations and reality.

People shun pensions because they can't afford to invest in them or they don't trust the industry. The Equitable Life debacle has been very damaging, as has the penury facing members of final salary schemes whose employers have gone bust.

Many are also put off by the inflexibility of pensions: you can't get your hands on your money until you are 50 and you have to buy an annuity by the age of 75.

What is needed is some creative thinking, such as the introduction of more flexible pensions so people can get access to their money before retirement in exceptional circumstances. So you wouldn't be able to release £5,000 before retirement to pay for a cruise, but you could have it to cover your mortgage payments if you lost your job. If this were the case, more people would be likely to commit their savings to a pension.

Far greater simplicity is also needed. Even if you are applying for a stakeholder pension, which is supposed to be straightforward, you must still complete pages of forms and answer confusing questions. Take the recent debate over the merits of opting back into Serps (the State Earnings Related Pension Scheme). If you don't understand why you opted out in the first place, how can you make a reasonable assessment of whether you should move back in?

Of course, you can always consult a financial adviser. But until we truly understand what it all means, we are unlikely to have real faith in the system. An expert might tell you you're doing the right thing, but if you aren't convinced, you won't pour hundreds of pounds of your hard-earned cash into a pension.

The Government has an opportunity to make this review more than an empty gesture. Let's hope it takes it.

m.bien@independent.co.uk