Enforced saving could be next step

Piggy bankThe next generation of workers may need to be forced into pension saving if automatic enrolment into schemes fails to generate enough take-up, a think-tank has suggested.

A report from the Social Market Foundation (SMF) looked at how savings policies may need to evolve over the next 20 years in order to deal with people living for longer and taking on more debt earlier in life.

It argued that compelling people to save into pensions may be the "next logical step" if the weakness of the economy and sluggish wage growth put people off trying to save for their later years.

The report said that future governments may have to consider stepping into people's finances more to help them manage their money, by forcing them to save into a pension, for example, and helping with loans through various "pinch points" in their lives such as dealing with childcare costs.

The Government's landmark scheme to eventually automatically enrol 10 million people into workplace pensions started last month and the initiative is being phased in over a six-year period.

Workers are allowed to opt out of schemes after they have been enrolled, but the Government wants employers to re-enrol people who have opted out every three years, to try to persuade them to save.

Fears have been raised of a looming pension-saving crisis amid declining rates of participation in schemes in recent years. By 2020 half of the UK population will be aged 50 or over.

Dr Nigel Keohane, SMF deputy director and author of the report, titled Jam Tomorrow?, said the state will need to "nudge, prod and regulate" people into managing their personal income and wealth.

He said: "That means considering policies like compulsory pensions saving, low-risk pension products and income-contingent loans for childcare."

A Department for Work and Pensions spokeswoman said: "We want to get as many people as we can saving for their retirement but we also recognise the need for people to choose. For millions of people, automatic enrolment means they will be saving into a workplace pension for the first time. However, people have been given the ability to opt out if they feel at a particular time in their life that saving into a pension is not right for them."
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