BRITAIN’S biggest insurers welcomed a Conservative election promise of £10 tax breaks for pensions savings but said that more was needed to encourage employers to pay retirement benefits.

Michael Howard, the Tory leader, said at the weekend that he would spend a chunk of the £4 billion he had set aside for tax cuts on encouraging low and middle-income earners to save. The Conservatives pledged to pay workers earning less than £37,295 a year £10 for every £100 they saved for their retirement.

Adrian Boulding, pensions strategy director at Legal & General, said the move to make saving more attractive was welcome. But the money would be better spent introducing “soft compulsion” in which employers received financial inducements to match workers’ pension contributions.

“Increasing personal tax relief won’t get employers involved in pension planning, and this is at a time when less than 20 per cent of employers are making contributions to their company’s stakeholder pension scheme,” Mr Boulding said.

“The politicians need to get the employers involved.”

The Association of British Insurers said that it had recommended to the Government that employers received tax breaks for making pension contributions.

In his report last December, Sir Peter Davis, chairman of the Government’s Employer Task Force on Pensions, said he was shocked at the disinterest many bosses showed in company pensions.

He said: “For smaller employers, the task force believes that additional incentives are needed to tackle the severe problem of pension undersaving.”

However, Gary Withers, chief executive of Norwich Union Life, said that before new incentives were introduced for either workers or companies, the current morass of pensions rules needed to be sorted out.

“This (Tory plan) looks like a simple policy but if you put it on top of a lot of complex old policies, it makes things even more complicated,” he said. “Perhaps we need to clear up some of the other incentives already in existence.”

• Artists who want to retire amid the bright hues of Spain can save for old age by contributing their work instead of cash to a trust. The Artist Pension Trust, launched yesterday, will comprise 250 artists, selected by the fund’s administrators, each of whom will contribute 20 pieces of art, to be sold in time for members’ retirements.

  MutualArt, the company that manages such trusts in the US, will take 20 per cent of the profit. Half the rest will be paid to the artist and the other half will go into the trust. David Ross of MutualArt, said: “There is a huge amount of wealth created by artists but artists are usually left out of it.”

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive