Pensions  

Compulsion must be ‘last step’ for pensions

The director of the Pensions Policy Institute played down the organisation’s suggestion last week – which prompted a flurry of activity on social media sites – 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 the PPI’s 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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Recommendations in the paper included persuading people to save more, making it easier to get advice, providing more incentives to reward pension saving, highlighting people’s housing wealth, and encouraging people to work longer.

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

His comments followed a reaction by 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.

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.”