PPI: Compulsory pensions only a ‘last step’

The director of the Pensions Policy Institute played down the organisation’s suggestion, widely reported last week, that mandatory pension saving “might need to be considered” if individuals opt out in large numbers once higher pension contributions kick in.

The option was put forward in a 57-page report looking at the amount of pensions contributions that are needed to obtain an adequate retirement.

He said: “As an independent research institute, we never put forward compulsion as a policy proposal. The way the current system is being implemented, there is a high chance that individuals will not have a good level of income in retirement, and we set out a whole spectrum of options to deal with that.

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“These include encouraging people to save more for themselves, making it easier to get advice, providing more incentives to reward pension saving, highlighting people’s housing wealth and the fact they can work longer.”

“If none of these options work in giving people the income they need, compulsion may have to be considered.”

Mr Curry’s comments followed a concerned reaction from Tom McPhail, head of pensions research at Bristol-based Hargreaves Lansdown, who tweeted that the PPI would be “keen to distance” itself from the suggestion and that communication of the report “was not very well handled”.

He said: “I do not expect Mr Curry or [pensions minister] Steve Webb to be particularly advocating compulsion. Listening to both speak at the launch event of this report, they looked to distance themselves from that interpretation.

“Mr Webb is at pains to point out that auto enrolment has been a real success so far, so it would be crazy to throw all that good work out of the window. If you make pensions compulsory now, you might force up higher participation rates but you would break the economy in the process.”