Steve Berridge – Government needs to start supercharging pension returns

Real-world returns projected on many DC statements make many feel ‘why bother’

Jonathan Stapleton
clock • 2 min read
Steve Berridge: If you can anticipate 10% regular per annum returns, you are going to be far happier giving larger chunks of your earnings towards pensions
Image:

Steve Berridge: If you can anticipate 10% regular per annum returns, you are going to be far happier giving larger chunks of your earnings towards pensions

Government needs to start ‘supercharging’ pension returns in a bid to improve the value of defined contribution (DC) schemes, IFGL Pensions technical manager Steve Berridge says.

Berridge said whichever political party forms the next government would have a "future timebomb" on its hand with inadequate private pension provision via DC schemes.

He said one of the key issues we have is that DC schemes provide "woeful investment returns" and therefore do not encourage members to invest more of their money.

Berridge added that part of the problem was the culture of regulation which exists in UK pensions – with a number of high-profile due diligence claims involving high risk investments meaning that most providers now only permit "vanilla" investment choices.

He said the Conservative government had started some debate in the area of investment – encouraging larger DC schemes to invest in more illiquid areas such as start-ups and non-listed companies.

Berridge also pointed towards Australia, which he said "led the way" in this area through superannuation schemes, which are "huge investors" in large capital projects, such as the M6 Toll Road.

He said: "In the UK we have always shied away from wealth creation, but somehow the government needs to start supercharging pension returns. I mean, if you are a private investor and you can anticipate 10% regular per annum returns, you are going to be far happier giving larger chunks of your earnings towards pension provision. By contrast, the current real-world returns projected on most DC annual statements make many feel ‘why do I bother'."

Berridge added: "There is definitely a ticking timebomb with UK pension provision, as things stand and future generations are at risk of pension poverty unless we have some radical thinking from government. Unlocking investment returns is a way to start improving the value of those DC schemes."

 

This article was published as part of Professional Pensions' PP Pensions Commission – which is looking to bring together industry opinion and ideas on the future of pensions ahead of the general election on 4 July.

Send your thoughts and ideas to the PP Pensions Commission via email to [email protected].

More on Law and Regulation

The full list of pensions ministers since 1998

The full list of pensions ministers since 1998

The full list of the ministers who have been responsible for pensions

PP Staff
clock 11 July 2024 • 1 min read
Stephen Tiley: CDC is a sustainable, sensible and workable pensions model

Stephen Tiley: CDC is a sustainable, sensible and workable pensions model

CDC also takes away the stressful decisions members are expected to make in DC

Professional Pensions
clock 09 July 2024 • 2 min read
John Moret: Dreams of a new post-election pensions landscape

John Moret: Dreams of a new post-election pensions landscape

‘Mr Sipp’ says pensions simplification should top the list of priorities for new government

John Moret
clock 08 July 2024 • 4 min read
Trustpilot