EUROPE - Pension systems across Europe have been labelled "irrational" by the chair of the European Federation of Retirement Provision.
Speaking at the Irish Association of Pension Funds conference in Dublin, EFRP chair Alan Pickering said the UK and many European countries should mend their “irrational” pension systems before looking to improve pension scheme governance.
Pickering outlined three components that he believes are a sensible solution for the future of European pension systems: a Labor market blind to age, a universal state pension which provides an “absolute guarantee against poverty in old age” and a near-deregulated market of private savings. Many European countries, not least the UK, have an irrational pension system and it's very difficult to give simple, understandable messages to those who you are trying to encourage to save more rationally because what is rational at a macro level is not necessarily rational at a micro level, he told the conference. No matter how effective you make the governance, that governance cannot make up for inadequacies within the broader system. He described UK pension savings shortfall statistics of £27bn from the ABI and £57bn from the Pensions Commission as “cuckoo-land figures” which needed people to behave like rabbits in the headlights of an oncoming car.
We cannot save our way through the demographic challenge - we have to encourage folk to work longer, Pickering said. Over-regulation was becoming a real problem in the private savings market, he added. At the moment in far too many countries, regulations are emerging that presume everyone is going to steal pension fund money, everyone is going to mis-sell, he said. At the end of the day it's the consumer that bears the cost of regulation, it's the consumer that bears the cost of over-regulation.
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