Call to overhaul retirement savings

Old woman with walking stickThe retirement savings industry is in the "last chance saloon" and people's hostility towards it is fuelling Britain's lack of a savings culture, a report has warned.

The Centre for Policy Studies report, which comes just months before millions of people will be automatically enrolled into pension schemes, asserts that the financial services industry is "widely, and justifiably, distrusted".
It argues that the industry has only a brief window of opportunity to redeem its tarnished reputation and must simplify its services and make them more transparent to better suit people's needs.

The report's author, pensions analyst Michael Johnson, proposed radically overhauling the savings system by setting up "super Isa" accounts, an enhanced form of an Isa which could be given to every newborn child and linked to their National Insurance number.

This would give everyone a single "seamless" savings vehicle from cradle to retirement, said the report. Other reforms would include setting up an industry-wide service to consolidate pension pots for defined contribution (DC) pension schemes, said the report, entitled Put The Saver First.

It said the market for annuities, which people buy when they retire and set the size of their pensions for life, should also be simplified with the setting up of a single "clearing house" in which all annuity providers should participate.

The Government should step in to take "far more assertive action" if significant progress is not made by the industry to revive its own reputation by 2017, said the report. It comes ahead of the Government's landmark scheme to automatically enrol workers into pensions, starting with larger firms this autumn.

Official figures recently showed that the proportion of people in a workplace pension has fallen below half for the first time in at least 15 years. Some 48% of employees are in a scheme, compared with 55% when the records began in 1997, the Office for National Statistics said.

The Association of British Insurers (ABI) criticised the report, describing many of its recommendations as "impractical, unworkable or unlikely to achieve their intended outcomes".

ABI spokesman Steve Gay said: "This report is interesting in parts, but fails to provide empirical evidence to support its core assertions about the UK savings culture."

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