The value of pensions could be dramatically improved and the poverty experienced amongst pensionersÃ‚Â significantly reduced – without incurring any additional costs – according to research by the Royal Society of Arts (RSA).
In the report,’Building the consensus for a People’s Pension in Britain’, the RSA said that fees “swallow up” 40 per cent of the value of a pension, people in Holland who put the same amount of money into their pension can expect a 50 per cent higher income in retirement, and minor changes to the regulatory framework in the UK could boost pension returns by 39 per cent.
The report called on the coalition government to build a broad cross party consensus in which political parties, employers, unions, and pension funds agree to implement a ‘pensions architecture’ that brings the UK in line with countries such as Holland and Denmark.
The RSA said that Britain should aim for a low cost system of occupational pensions, based on auto-enrolment, a limited number of large suppliers and collectively provided pensions. Also, pension savings should be aggregated in a way that will give adequate returns and changes to the regulatory structure are modest in size and easily achievable.
A Commission of Inquiry should be set up by the government to build on the growing consensus about how to solve Britain’s pension crisis, the report said, and the commission would “iron out” the details and help ensure that employer organisations continue to build on initiatives by the TUC and CBI to develop a joint strategy that tackled pensioner poverty in the UK.
The RSA’s David Pitt Watson said: “By common consent, the UK private pensions system is not fit for purpose. The government is introducing auto enrolment, but doing little to ensure providers offer good, low cost products. It has established NEST, and loaned it hundreds of millions of taxpayer money, but has then prevented it from competing by restricting the size of contribution it can take. The danger is that we are creating a weakened monopoly rather than healthy competition.”
He added: “What we are suggesting is not some new structure. It is based on tried and tested systems in other parts of the world, and recommended by pensions experts globally. What we need now is consensus, and the will to change.”