In a recent report jointly issued by Brahm Reseach and Cicero Consulting, 67% or people aged between 20 and 45 believe that the state pension will not be around when they come to retire.
When asked what the solution to this retirement problem was, 75% thought that the Government should introduce compulsory pension contributions.
Our view
Compulsion on its own will not work. If everybody is forced into saving then the effect is that the playing field is just moved up a level. In simple terms, everybody will have the same level of income, as a starting point, mush as is the case for State pensions, and the only impact will be inflation as prices adjust to reflect demand for goods. The answer, in our opinion, is quite simple. Education! has, since the day we started trading, called on the industry and Government, to educate people when it comes to financial planning. People need to accept responsibility themselves, and just forcing payments into a scheme will not suffice. Of course, if the Government cannot afford state pensions, then compulsion will arrive. However, our view is that it should look at making pensions more attractive and accessible. The reason people do not save enough in pensions is because they cannot access the funds. If tax incentives were reduced, but the accessibility were increased then we believe this would make people more open to saving. For example, using the Minimum Income Guarantee as a benchmark. If people were forced to at least use their pension fund to purchase a guaranteed income at this level and any excess above this, they were free to do with as they wished, be it for income or for lump sum cash, this would make pensions more attractive.
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