Your Money: Singles seek pension shift

THE MESSAGE given to the Goode Committee on Pension Reform by a gay rights lobby group sheds beams of light on the fusty world of pensions.

Stonewall, a privately funded group numbering Sir Ian McKellen among its backers, recognises that personal pensions offer a much better deal to all single people than the traditional company scheme.

A sum of money builds up and can be used to buy a single-person pension or a joint life one with anyone else named as the 'other half'.

Meanwhile, the company scheme makes married and single employees pay the same contributions for unequal benefits. The married people get a widow's or widower's benefit at the end with no diminution of their pension, while the single people do not.

So committed single people in excellent employee funds, such as the index- linked schemes run by the Civil Service, have to decide whether to give up the otherwise generous terms and swim alone or carry on as a disadvantaged member of the scheme.

Some pension schemes have extended the couples' pensions to people living as man and wife. But moving on to same-sex couples is a step too far for most. Anyway, with one in three marriages ending in divorce, a more individual approach to pensions seems to be appropriate.

Stonewall told the Goode committee that one option would be for homosexual men and women to be allowed to nominate their long- term partners to receive 'partner's benefits'. This would depend on a cohabitation test, but would not require the partners to be economically inter- dependent.

Alternatively, the right to a spouse's benefit would be an optional extra requiring additional pension contributions. Single people who thought they might one day acquire a partner might decide to pay up, while others (including married people) could opt out. People who changed their minds later and found a partner they wanted to provide for could buy into the spouse fund.

This semi-detached approach to spouses' benefits would also help in divorces when a splitting of pension rights is needed for a fair settlement.

In the submission to the Goode committee, Stonewall said: 'It does seem to us unreasonable to expect single people to subsidise married couples by paying for extra benefits which they themselves will never receive. With single heterosexual people, it might be argued that they will probably marry sooner or later, and if so, they will also enjoy these benefits. With lesbians and gay men this argument collapses, since they are never likely to marry.'

Gradually, company pension schemes will come to resemble personal pension plans, with the eventual outcome dependent on the investment performance of the fund rather than being related to the employee's salary on retirement.

This will answer Stonewall's objections in the long run, but reform is needed in the meantime.

STANDARD & Poor's, the agency regarded as the authority for assessing the creditworthiness of banks, has taken on the life insurance companies. In a survey of just 29 organisations, it has declared four 'vulnerable'.

Guardian Assurance, (the life fund of Guardian Royal Exchange), National Provident Institution, Prolific Life and Pensions and Windsor Life are all deemed to be lacking in real financial strength.

Of course, you would not expect them to agree. However, anyone with one of their policies would be entitled to feel uneasy. The list is certainly not exhaustive.

But the actuaries at the companies fingered by the statistics dispute the conclusions.

It is not surprising that the returns made by the companies to the Department of Trade and Industry have suddenly become required reading for financial advisers. Yet the various solvency ratios are hard to understand, and no single measure is accepted as a genuine test of strength.

Indeed, the actuaries who hold the reins at the companies have a vested interest in maintaining the mystique and resist the very notion of agreeing a formula that would provide a simple yardstick for ordinary investors.

It is not too much to demand that a profession that prides itself on its mathematical sophistication should agree to start working towards one.