After researching pension arrangements around the world, the Association of British Insurers has claimed that compulsory saving in pensions is neither simple nor efficient. They found evidence that voluntary saving can be made to work if it is supported by financial incentives, workplace advice and auto enrolment as long as means-testing is structured not to discourage investors.
The ABI looked at pension arrangements in Australia, New Zealand, Sweden and the US in its report, and each structure was found to have its own faults, but say lessons can be learnt from each of the countries, although admit while there is no universal solution, voluntarism can work and compulsion is not an easy answer.
Our view
Compulsion does have its problems with potential 'knock-ons' with inflation and people not saving elswhere and just diverting wealth into pensions because they have to. However, the reality is we have a huge financial timebomb and people need to be 'encouraged' even more to save for the longer term. Compulsory pensions will be here, we believe, within 10 years.