UK - Compulsory pension contributions could make the savings crisis worse, senior industry figures warn.
Trade unions believe the case for compulsion is overwhelming - irrespective of the findings of the upcoming report by the Pension Commission chaired by Adair Turner.
Unions have called for employers to pay contributions of 10% of salary with employees paying in 5%.
Amicus head of pensions Julian Richards said: “We think the case for compulsion is clear. We need it and the government needs to implement it straight away.
“It is impossible to argue that the voluntary system can still work and has worked because it has clearly failed. The longer we keep talking about it the less people are saving adequately.”
But Scottish Equitable pension development director Stewart Ritchie (pictured) said countries, such as Australia, which had introduced compulsion, had found that it deterred pension saving.
He said: “Some workers had not only saved less outside their workplace scheme, but had even borrowed against the money they were expecting to receive from their pension.
“This is not a clear-cut measure and if we were to rush into it, we could repent at leisure. I think there is merit in waiting to see what Adair Turner comes up with because of these serious reservations about compulsion’s practicalities.”
And the National Association of Pension Funds agreed.
Spokesman Andy Fleming said: “We prefer the carrot of incentives to the stick of compulsion. How do you compel somebody on a low wage to pay into their scheme when their priority is to have food on the table?”
He also pointed out that there was evidence employers had reduced pension contributions following the implementation of compulsion to bring them into line with the government-set minimum.
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