Talking Head: UK pensions policy is at a crucial point in history. Rob Gardner asks whether the new government will make the right moves.
There have been a lot of policies during the past 15 years.
There were 84 changes to UK pension law between 1961 and 1999. Since 2000, there have been 491.
But were they the right policies? Are they addressing the magnitude of the problem we face, highlighted by the Turner Report in 2004?
The new government has the power to profoundly shape the future of the next generation. One of the toughest challenges lies in the provision of comfortable retirement income.
Efforts towards financial education on pensions need to be accelerated.
This can be achieved by putting an emphasis on getting our children to save, beginning in primary schools.
As Lord Hutton recently stated in the 'Age of Responsibility' report: “We must become a nation of savers if we are to succeed.”
The last government unleashed ''freedom and choice'' on a public that is, for the most part, ill-equipped to deal sensibly with the choices on offer.
It is also way out of line with increases in longevity.
We can see that getting rid of the requirement to annuitise and allowing access to pensions pots from age 55 were politically shrewd moves, but were they sensible?
Learning lessons
The similar Australian system of 'freedom and choice' is still failing to deliver an adequate retirement income for the average Australian.
The over-80s are running out of cash and there is talk of a need to reintroduce compulsory annuity purchase.
From a culture of debt,we must become a save more, spend less society
Former prime minister Paul Keating argues that had the compulsory rate been 15 per cent since 1996 – rather than the then 9 per cent – total superannuation assets in Australia would be approaching AUS$2trn (£1trn), which is almost double the current level.
A bold government could also establish an independent pensions commission with the power to make real decisions, free from political interference.
It could also look at safe harbour guidelines and encourage employers to educate and inform their employees.
There has been a clear shift in responsibility towards the individual from the state, but the onus is on business leaders, politicians and innovators to collectively address the problem.
We need to envisage a society where everyone knows how to budget, save, and invest to finance their future.
This requires an innovative, long-term approach and courageous decision-making, but most of all we need a radical shift in behaviour. From a culture of debt, we must become a save more, spend less society.
Auto-enrolment is a step forward, but even the 2018 contribution rate is merely poverty prevention.
We need to think bigger; extraordinary times require unprecedented change. A good place to start would be establishing a 15 per cent national savings target.
Rob Gardner is co-CEO of Redington
