The phrase “ticking timebomb” might sound clichéd, but with only a third of workers saving into a pension and many more saving inadequately, millions of people could face a life of poverty in retirement.
Lord McFall chaired the Workplace Retirement Income Commission (WRIC), an independent review of retirement saving which aimed to find long-lasting solution to this problem. Over five months of investigation, consultation and interviews with consumers, the pensions industry and employers across the UK, the Commission looked at ways of making pensions more efficient and adequate; ways of engaging employees and improving employee confidence in pensions; and ways of encouraging employers to provide good-quality pensions to their workers.
The Commission’s final report was published in August 2011.
Lord McFall said:
“Too many people are stuck in a complex, costly and inefficient system that relegates the consumer’s interest to second place. On top of that, they simply aren’t saving enough to secure a decent retirement.
“People need to get more bang for their buck, or they’re not going to bother with a pension. Instead they’ll end up spending today, ignoring tomorrow, and scraping by in poverty on the state pension. We cannot stand by and let that happen. The complacency of many in the pensions industry is alarming.
“Sadly, millions of people are being left to navigate a pensions minefield that would puzzle Einstein. We’re seeing less saving and lower trust in pensions, and that’s a vicious cycle that cannot continue.”Auto-enrolment will help, but it’s a halfway point, not the final answer. More needs to be done. We hope this report will be a catalyst for discussion about the bigger picture.
“Pensions are a long-term issue and the public is tired of short-term tinkering. We need a permanent, independent commission to take the politics out of pensions and restore some faith in the future.”
One of the items that came out of the WRIC’s report was pensions charges, where the Commission was concerned that many people are not getting value for money on their pension. The Commission called for a Government cap on pension charges and for more transparency for consumers around the charges they will pay.
Lord McFall said,
“There’s no point in bringing people into pensions that will erode their savings through high fees. The Government should set a clear ceiling on the charges that will be allowed under auto-enrolment.”
The pension industry is already working on its own code of conduct for transparency on pension charges, in response to Lord McFall’s report.