The Secretary of State for Work and Pensions, Andrew Smith recently spoke to Money Marketing, a financial services industry publication on ways to beat the pensions crisis in the UK.
Mr Smith said that the Government was looking at the US ‘401(k)’ pension system and considering using it, or a variation of it, in the UK. This would mean linking benefits that employers could claim on their own pensions, to the number of their employees in pension schemes.
In the US, employers are allowed to have tax relief on their own pension contributions as long as 85% of staff are in a pension scheme. Mr Smith also talked on the subject of making pensions compulsory for employees. He said that people would perceive this (in our view quite rightly) as yet another tax.
Our View
Based on Mr Smith’s comments we see that making membership of a pension compulsory as the very last resort to beat the pension crisis.
By looking to other countries for their pension solutions means that the Government really do have a problem with our pensions system and they appear committed to solving it. However, it all seems to be talk and consultations that do not produce the goods.
We do have a huge problem in the UK but people do not realise the full impact until it is too late and they start receiving their pensions.
People have to provide for themselves, the Government is not going to do it at anything other than a subsistence level. The sooner people understand this and start taking action, the better.
Learn more about pensions in the Pensions Adviser.com.