The Workplace Retirement Income Commission, run by Lord McFall, has found that up to nine million people face a ‘bleak old age’ in retirement due to issues with the private sector pension system.
This means that one third of the British workforce faces an impoverished retirement due to faults with the current system.
McFall and his Commission described private pensions as “complex, costly and inefficient”.
They identified a series of changes needed to improve the state of the private pension system.
These changes included an increase to the minimum amount contributed by employees to the new National Employment Savings Trust (NEST) pension schemes when they are introduced in 2012.
The Commission also made recommendations about charges, annuities, risk, cultural change and stability.
This report represents more pension tinkering.
One of the biggest problems faced by the pension system is the constant changes made to the rules by successive governments.
Pensions are long-term savings vehicles which are regularly subjected to short-term thinking to satisfy political desires or economic pressures.
The most positive change this government could make to the pension system would be to detach it from politics by creating an external Pension Policy Committee, in the same way interest rate decisions were handed over to the Bank of England.
This would ensure that decisions about pensions were made in the best interests of current and future pensioners, rather than applying the constant tinkering which has become a hallmark of pension policy in the UK.
Photo credit: Flickr/Myrna Litt
