Saga' auto-enrolement should be more flexible
26/01/2012
Topic: Pensions
British workers opted-in to the new pension auto-enrolment scheme should have more flexibility regarding what they can do with the savings, it has been claimed.
The ability to use funds in these pots for a range of needs, such as paying off student debt, would encourage more people to remain in the programme, believes Saga Director General Dr Ros Altmann.
She made the comments ahead of a speech by the Chief Executive of the Association of British Insurers Otto Thoresen, who is expected to say pension savings would be best put to use by paying off debt accumulated by students.
Both experts believe this would be a more practical application of savings so that young people would not have to suffer the burden of debt, with stored funds locked away for decades.
Dr Altmann said: “As we head towards auto-enrolment, with millions of low earners being forced into pension savings from which they have to choose to opt out, we urgently need to also consider how to redesign pensions so that they suit more people.”
It was suggested that many Britons would choose to opt out of auto-enrolment under current provisions as they need that money sooner rather than later, reducing the nation’s savings habits.
Dr Altmann further highlighted the fact the scheme could be difficult for older workers as their pension savings would be penalised by means tested benefits to which they become entitled in retirement.
As a result, their pension savings would not deliver good value, so that the employee may have been better off spending the funds or saving it another way.
“I would urge the government to consider changing the design of pensions, and encouraging or requiring employers to contribute to other forms of saving for their staff,” Dr Altmann said.
Recent figures from the ABI showed 47% of workers intended staying in auto-enrolment for the employer contribution.
Posted by Liam Tomlinson
The ability to use funds in these pots for a range of needs, such as paying off student debt, would encourage more people to remain in the programme, believes Saga Director General Dr Ros Altmann.
She made the comments ahead of a speech by the Chief Executive of the Association of British Insurers Otto Thoresen, who is expected to say pension savings would be best put to use by paying off debt accumulated by students.
Both experts believe this would be a more practical application of savings so that young people would not have to suffer the burden of debt, with stored funds locked away for decades.
Dr Altmann said: “As we head towards auto-enrolment, with millions of low earners being forced into pension savings from which they have to choose to opt out, we urgently need to also consider how to redesign pensions so that they suit more people.”
It was suggested that many Britons would choose to opt out of auto-enrolment under current provisions as they need that money sooner rather than later, reducing the nation’s savings habits.
Dr Altmann further highlighted the fact the scheme could be difficult for older workers as their pension savings would be penalised by means tested benefits to which they become entitled in retirement.
As a result, their pension savings would not deliver good value, so that the employee may have been better off spending the funds or saving it another way.
“I would urge the government to consider changing the design of pensions, and encouraging or requiring employers to contribute to other forms of saving for their staff,” Dr Altmann said.
Recent figures from the ABI showed 47% of workers intended staying in auto-enrolment for the employer contribution.
Posted by Liam Tomlinson
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