UK - The government must end its "micro-management" of the pensions industry if it wants to boost savings levels, simplification report author Alan Pickering told delegates.
Speaking at City Forum’s Saving and Pensions in 2020 conference, Pickering said the government can boost savings levels by taking a “lighter touch” approach to regulation.
He said simpler tax rules, an industry-led compensation scheme and equal encouragement of different savings methods should be introduced.And Pickering – who launched a joint report, entitled How Government can get us saving again, with the Adam Smith Institute at the conference – said the state pension must be “dramatically” increased.
He explained that as the state system has never provided an “adequate” pension, private sector arrangements have assumed the role of privatised welfare, leaving the pensions industry vulnerable to “unhelpful” political interference.
To resolve this, Pickering believes the basic state pension and the second state pension should be merged and set at 40% of average earnings, compared to the current level of 15%. Also, the pension age should be raised from 65 to 68.
The measures form part of a three-pronged strategy that Pickering believes will boost saving levels in the UK. The final part would be to give employers incentives to retrain older workers rather than “throwing them on the scrap heap”, as well as set up and support private pension plans they believe are right for their staff.
By raising the basic pension to adequate levels, Pickering said that there will be no need for the “heavy and expensive” regulation inflicted upon the industry. This will allow the industry to make pensions cheaper, better value and easier to obtain.
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.