The UK pensions and retirement income system can learn a great deal from international examples, according to research from the Pensions Policy Institute (PPI).
The report, entitled “How might the UK pensions landscape evolve to support more flexible retirements” is part of the PPIs research series ‘Transitions to Retirement,’ which explores how people access pension savings.
Steve Groves, CEO of co-sponsors of the research series Partnership and panellist at the associated event said:
“While it is early days for the Pension Reforms in the UK, there are some international examples that we need to consider and learn from in order to ensure that the system pays more than just lip service to its original objectives. Understanding longevity is a challenge the world over but data available from the US clearly highlights the impacts of getting this calculation wrong.
“Almost half (46%) of people in the US die with less than $10,000 in assets. Not necessarily because they have not saved enough but because 62 percent have underestimated the length of their retirement. The US Treasury Department has recognised this and the Internal Revenue Service will now allow pension schemes to offer deferred annuities as a default investment to “protect themselves from outliving their savings
According to the report, introducing a minimum income requirement for pension freedoms would mean that people would have more peace of mind that they will have enough to live while retaining the freedom of choice for their retirement.
Based on its research Groves recommends changes to the taxation system to encourage saving or discourage reckless withdrawals.
“What a review of the world’s retirement regimes has shown is that no system is perfect. However, in order to make the new freedoms work, we need to ensure that we do not lose sight of the original purpose of a pension – to provide a guaranteed income in retirement. And holding that firmly at the front of our minds, we need to be brave enough to learn lessons from other countries and where necessary make adjustments to our system to ensure that the UK system is truly fit for purpose.”