Pensions have passed their sell-by date and need a complete revamp, according to a survey of
Most savers consider a pension is a stealth tax that locks up money they need for day to day
living while they are working and that the rules are too complicated for anyone other than an
expert to follow.
Even with the latest shake-up that has scrapped the need to buy an annuity from April 2011
and the impending auto-enrolment nest pension due to start in April 2012, most people are
disillusioned with pension saving.
The outflow of pension funds in to popular QROPS offshore pension schemes is seen as another
consumer reaction to their dissatisfaction with the pension system in the UK.
In the latest survey of firms representing 9 million employees, carried out by the Association of
Consulting Actuaries (ACA), savers put forward a clear message:
69% claim they are disillusioned with saving for retirement and about a third will opt out
of pensions if they can under the current systems
40% of workers either can’t be bothered or don’t see the point in having a pension
Abolish pensions for lifetime savings
Instead, they advocate that the term ‘pension’ should be abolished from every retirement plan
except the state pension with ‘lifetime savings’ taking its place.
A lifetime savings scheme ought to allow people to take out cash when they are hard up – in
a similar way to investing with an ISA. Many employees would favour auto-enrolment in a
savings scheme rather than a pension if they could manage access to their own cash.
Many see that a lifetime savings plan would let workers either hand their funds over to a
manager or let them make their own investment decisions.
Simplifying access to money and removing tax restrictions to make the fund accessible for
expats living offshore would also be welcome moves.
One of the best ways of encouraging saving for retirement would be to pay a flat rate state
pension with no means-testing and to let self-interest govern how much people want to save for
the future, with no extra top-ups from the state for those that don’t bother.