PP Show 2011: Compulsion in five years if auto-enrolment fails

The government are yet to develop a grand vision for pensions and should be prepared to resort to compulsion if auto-enrolment fails, delegates heard.

Speaking at a panel discussion on reforming the pension system, Buck Consultants head of technical services Kevin LeGrand recognised that there had been promising developments.

But he added: "I wonder at the moment if we have the grand vision needed to reinvigorate pensions as the government said they would."

Barnett Waddingham consultant Malcolm McLean gave the coalition 80 out of 100 for its performance on the state pension but said it needed to start making contingency plans for what to do if too many opt out of auto-enrolment.

"The next step is full-scale compulsion," he said. "Which is not that radical - we already have a form of compulsion in National Insurance contributions."

McLean predicted full-scale compulsion could be in place within five years if auto-enrolment does not deliver as expected.

Barnett Waddingham senior partner Adrian Waddingham said that auto-enrolment was critical in delivering the promise to improve coverage.

"Even looking back to when schemes in Britain were at their best, they only ever reached half of the workforce," he noted.

Waddingham was only marginally less impressed with pensions minister Steve Webb than McLean giving him a 77 out of 100 but said that progress had been "infuriatingly slow".

"The minister has said the department will revisit risk sharing, but six years after the Turner report, I'm disappointed that we haven't got something in this area yet."

He said it would be unfortunate if defined contribution in its current was the best the industry could do and called for more imaginative solutions.

"One argument is that the state could pick up the longevity risk with annuities being for a fixed term of say, 15 years after which the state steps in," he suggested.

Waddingham said risk sharing should be the government's top priority, while LeGrand said it should concentrate on developing a grand plan and Mclean said contingency plans for compulsory enrolment should be the main concern.