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Pensions could be 40% more valuable
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PostPosted: Tue Dec 07, 2010 10:56 am 

Joined: Tue Mar 10, 2009 1:21 pm
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Location: Hampshire
The value of workers' pensions could be increased by 40% with the introduction of cheaper, collective schemes in the UK, research has shown.

The Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA), which aims to encourage new ways of thinking, said pension providers take a huge part of the money paid into personal pensions as fees.

Charges typically eat around 40% of the value of the average pension, according to RSA.

It is calling for UK workers to be allowed to join low-cost occupational pensions, similar to what is offered to workers in The Netherlands and Denmark.

RSA added that the cheaper pension provision can be achieved through auto-enrolment, which cuts the cost of selling pensions, and ensuring a limited amount of large suppliers.

It added that introducing collectively provided pensions would also further reduce the administration costs associated with having to report individual performances.

The report said if a Dutch person and a British person saved the same amount into their pension, the Dutch person could expect to receive a retirement income that was 50% higher because of the lower charges they paid.

The group said if minor changes were made to the UK's regulatory framework, enabling collective defined contribution schemes to be introduced, pension returns could be boosted by 39%.

It said the introduction of Nest (National Employment Savings Trust), when auto-enrolment comes in, was a good start but it said contributions to the scheme should not be restricted to £3,600 a year.

The RSA is calling for a Commission of Inquiry to be set up by the coalition Government to build a consensus on how to solve the UK's pensions crisis.


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