UK - Record numbers of employees are saving too little whilst in work and are losing out because they collect several small individual pensions as they move jobs or change their pension provider.
The Association of British Insurers (ABI) claims that one in five people (21%) aged over 50 in paid employment have three or more private pensions and nearly two thirds (62%) have stopped paying into their first pension because they changed jobs.
As a result of this, British employees are seeing lower savings and incomes in retirement than would otherwise be the case.
The body is now calling for action from pensions providers and the government to make it easier for savers to consolidate their savings into fewer, but larger, individual funds.
In a new policy paper, which has been sent to the Pensions Commission for consideration, the association argues that this ‘proliferation’ of pensions makes saving more complicated and costly for consumers, while also making administration more difficult for companies. Helen McCarthy, the ABI’s head of pensions and savings development, said it was time to introduce “more simplicity, better service and greater choice”.
McCarthy said: “Together with other initiatives such as increased auto-enrolment, these proposals could have a significant positive impact on levels of pension saving and improved value for consumers.
“Neither the Government nor the pensions industry has so far appreciated the full impact of this unnecessary complexity on consumers.”
Additionally, the ABI state that changes to pensions legislation and increased labour mobility mean that the number of people with complicated pension arrangements is likely to grow rapidly over the coming years.
In response, it is proposing new measures to combat the increasing problem.
Firstly, it will lead an industry initiative to develop a single pensions transfer process for the pensions industry, with a common transfer form and standardised transfer arrangements.
The ABI is also calling on the government to reform pensions legislation so that employees can require employers who do not provide pensions to pay their employee pension contributions into a specified stakeholder pension scheme of their choice.
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