In his blog, Fraser Smart, Managing Director, Buck Consultants comments on the promised land of comfortable retirement:
Moses was a leader, lawgiver and prophet who after 40 years in the desert led the Israelites to the promised land.
After 40 years or more of working we all hope to spend at least a few years in the promised land of comfortable retirement.
The Centre for Policy Studies (CPS) have suggested that saver apathy could lead to the demise of private pensions by 2050. They have blamed the fact that it is such a distant concept, in terms of young people's ability to afford putting funds aside for a pension, that young people are just not going to save for pensions. New generations in the UK may have to wander for a good deal longer than Moses before they can afford to retire.
This is bad news for automatic enrolment which aims to increase both the number of people saving for a pension and the amount that it is being saved. Further bad news is found in recent research which shows that in the current economic environment many employers are considering reducing contribution levels to defined contribution schemes that are being used for automatic enrolment purposes. Employers do not want the cost and aggravation of running a separate arrangement for automatic enrolment. And if they are going to use their existing defined contribution arrangement, lowering contributions is one way of offsetting the cost of automatic enrolment.
So automatic enrolment may mean more people are saving for their retirement (assuming they do not opt-out). But it may result in less being saved not more in many instances.
Golda Meir, a former Prime Minister of Israel, once said about Moses “ Let me tell you something we have against Moses. He took us 40 years through the desert in order to bring us to the one spot in the Middle East that has no oil!”
There is a real danger that automatic enrolment and government policy might also bring us to the wrong spot in 40 years’ time.
Moses is of course also famous for bringing back the 10 commandments. We could do with 10 more commandments in relation to pensions:
• Thou shalt not view pension funds as easy pickings and shalt take a long term view over pension savings. Not giving in to the temptation of making a quick buck or two now.
• Thou shalt ensure the Treasury and the DWP operate in a joined up manner and shall heed thy paper on reinvigorating pensions
.
• Thou shalt restore a sensible annual and lifetime allowance to encourage pension saving.
• Thou shalt announce on an all-party basis that tax allowances on pension contributions are sacrosanct in a belated attempt to increase people’s trust in them.
• Thou shalt increase the minimum levels of contributions for automatic enrolment forthwith to counter the levelling down which is becoming evident.
• Thou shalt lift the restricts on transfers in and contributions to NEST forthwith and not listen to the false prophets who are worried about their profit.
• Thou shalt hold a public enquiry into current annuity rate levels with a view to reversing their current downward spiral.
• Thou shalt ensure the EU keep their noses out of UK pensions.
• Thou shalt look for ways of making pension savings attractive such as allowing early access to pension pots in prescribed circumstances.
• Thou shalt revamp disclosure requirements making them sensible from an employee/employer perspective. Members should be only told what they need to know and not told of irrelevant matters simply because there is a legal requirement to do so.
We might then have a chance of reaching the promised land in a sensible timespan!
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