Pensions  

Insiders criticise 'unfair' pensions system

Insiders criticise 'unfair' pensions system

Nearly 80 per cent of of pension professionals feel the pension system is unfair on young people, research from the Society of Pension Professionals (SPP) shows.

The survey, which polled 209 SPP members, also shows more than half (51.2 per cent) of respondents felt the system is unfair on the self-employed.

Hugh Nolan, president of the SPP, said today (11 September) at the society’s annual conference “there is a lack of intergenerational fairness in the UK pension system”.

On the other hand, 71.3 per cent of those polled said the UK pension system was fair on those about to retire, while more than two-thirds (67 per cent) felt the system was fair on public sector employees.

Almost three quarters (72.7 per cent) of the pension professionals felt the government was most responsible for delivering equality in pensions.

But less than half of respondents (46.9 per cent) agreed equality was a major concern for the government.

Mr Nolan said: “Despite pension reform being a major focus for the government over recent years, it is clear that the current system in the UK favours certain groups over others.

“Those fortunate enough to be at or close to retirement, or in public sector jobs, look set to benefit while the young and self-employed are deemed to be getting an unfair deal.”

Mr Nolan said that to encourage young people to engage with their pensions and for the next phase of auto-enrolment to be successful, the government "will need to redress the balance".

The government has previously announced the minimum auto-enrolment contributions will increase to 5 per cent in 2018 and 8 per cent in 2019.

Mr Nolan said the increase in the minimum contribution would "exacerbate the young people inequalities”.

He recommended an opting down option, where savers can decrease the percentage of their contributions, instead of being force to opt out.

A total of £17bn a year will be going into workplace pensions by 2019 to 2020 as a result of auto-enrolment.

Alistair Cunningham, financial planning director at Surrey-based Wingate Financial Planning, did not agree with the survey's findings.

He said there were three areas of unfairness in the current system.

The first of these were the public sector workers, who he said have "unusually generous final salary benefits”, followed by lower earners, who he said do not receive the same benefits on tax relief as the more wealthy.

But he said the single greatest unfairness was “the perpetual tinkering to the rules which do not allow any strategic long-term planning”.

maria.espadinha@ft.com