Personal Pension  

Compulsion is the way forward for pensions: Fink

Speaking at the National Association of Pension Funds conference in Edinburgh, he pointed to analysis of the UK annuities market, which showed that the cost of retirement income had doubled over the past 40 years, with every £1 of retirement income costing the average 70-year-old male £12.

Mr Fink said the analysis, conducted by BlackRock as part of its Investor Pulse Survey, highlighted the need to encourage saving from an earlier age to combat the effects of lower interest rates, the eroding effect of inflation and increased life expectancy.

Mr Fink said: “As I have advocated in the US, I would recommend simply making an appropriate level of retirement savings mandatory here in the UK, without the opportunity to opt-out.

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“This has been done with the superannuation system in Australia and has proven to be extremely effective. There is too much risk that people will either opt out, or not put enough away even if they remain in a plan.”

Earlier this year, Research by the Policy Exchange revealed that the average UK worker has a pension pot of just £36,800.

This is estimated to produce an income of £1340 a year in retirement, highlighting the need for education around pensions and the effects of longevity.

Figures from the Office for National Statistics last year revealed that 4100 UK pension plans remain in deficit relative to their liabilities, with a £140bn shortfall overall.

Mr Fink added: “The shift from defined benefit to defined contribution retirement savings has presented a huge challenge to individual savers here as elsewhere in the world. We need people to save more, and save earlier.”

Mark Ireland, financial planning consultant for Hertfordshire-based Richmond House Financial Services, said: “We have to recognise we are living for the most part in a ‘live for the moment’ world, where the next mobile phone upgrade is far more important than our plans for longer-term savings.

“I agree with Mr Fink’s sentiments, which echo those produced in the recent Policy Exchange report. Compulsory pension contributions I think are inevitable and auto enrolment is the start of the development of these important pension reforms. Not long after, I believe there will be an increase in minimum contribution levels through further phasing.”