Start retirement saving now or the UK government may make you
By Sarah Mortimer ,ReutersLONDON -- Britain may soon have to force workers to start saving for retirement to cut a soaring pensions bill set to reach 120 billion pounds in 20 years.
January 26, 2013, 12:02 am TWN
The government wants people to pay into their own pension pots rather than rely on the state. But many employees, with limited disposable income, have been reluctant to do this.
A scheme, introduced last October, automatically enrolls staff 22 years or older into a company or national pension plan, but gives them a choice to opt out.
So if large numbers of workers pull out because they don't want to pay or can't afford the contributions, the government may decide to make membership compulsory in a Pension Review due in 2017.
“If opt-out rates are 50 percent or more, it is possible the government will suggest removing opt-out altogether and make pension saving mandatory,” Paul Gilbody, head of defined contributions consultant relations at BlackRock Investment Management, said.
The government's current pension legislation is an attempt to tackle the country's ballooning pensions bill, set to hit 8.5 percent of economic output by 2060, from 6.9 percent now.
Less than half of employees in Britain are putting money into a workplace pension scheme, the lowest proportion since records began in 1997, according to the Office of National Statistics.
Britain lags behind countries including Denmark, the Netherlands and Australia in global pension rankings. Its pension system ranks seventh out of 16 countries in a global comparison of national schemes, according to data from consulting firm Mercer. Its lowly ranking reflects an ageing population, low investment returns and large government debt.
The Department of Work & Pensions told Reuters it had no plans to introduce mandatory private pension saving, but it did need to compel millions more people to save.