UK - The International Monetary Fund (IMF) has called for a "simpler and more coherent system of public and private pension provision".
Following a staff mission to the UK, concluded on 19 December, it said obstacles to adequate private saving included the difficulty of making rational decisions about long-term saving, the high cost of private pension products, the complexity of the state pension system and uncertainty about how it will evolve.
The report said options to address these issues could include the introduction of a national DC scheme with automatic enrolment and low operating costs, simplification of the state pension system with strengthened incentives for private saving, and increases in the state pensionable age as life expectancy rises.
Raymonde Nathan, consulting director at Jardine Lloyd Thompson, agreed there was a need for simplification but said the recent attempt to tackle this through the 2004 Finance Act entitled “Simplification for Pensions” had produced results which were, “unfortunately still things which are very complicated.”
Nathan took issue with the suggestion that the high cost of private pension products was an obstacle.
“I wouldn’t agree because if you want your own pension arrangement the costs are around 0.5% of funds generally, you can get a stakeholder for 0.5%,” he said.
The real issue, he added, was lack of money.
“If you’re earning £20,000 a year and you’ve got a mortgage and two children, where is your spare cash to provide a pension?” he asked.
“It’s just not there, so the majority of people need some assistance to provide a pension, not because they don’t want to but because they haven’t got the money, and that’s why the state provides pensions to that category in the main.”
The IMF concluded that future governments may be forced to increase the generosity of the state pension system and that important social choices must be debated to reach a consensus on, “the share of scarce public resources devoted to pensions.”
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