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We need state pension reform before we know that auto-enrolment can be safe

Dr Ros Altman
Director-General at Saga
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Post date: Tuesday, 24th January 2012

Ros Altmann comments on DWP launching a new campaign to get people saving for retirement.

Anything we can do to make sure people save for later life is a good thing and this latest campaign, although small in scale compared to other initiatives, will go some way towards helping to improve the lives of older people.

However, we need state pension reform before we know that auto-enrolment can be safe. A redesign of pension products is necessary to avoid, for example, punitive measures where state pension penalties are imposed through means testing.

We know that people begin thinking about their pensions far too late. There needs to be a culture shift around pensions in the UK and perhaps this campaign will help people see that saving for later life needs to be part of our ‘savings culture' from an early age - and certainly not a last-minute decision when you are in your 40s or later. 

But it will be helpful to improve the flexibility of pensions in order to encourage more people into long term saving. Employers are ideally placed to help kick-start a new savings culture and the reality is that, as traditional workplace final salary pensions are almost all closed, individuals will face much bigger risks than ever before.

If we redesign state pensions properly then people will understand in future that, if they have no other later life income, they will be unable to afford a decent lifestyle as they get older. Either they need to save or they will have to keep working or they will be very poor. 

I believe that pensions advice and information needs to be more accessible with less complex jargon and red tape. People need to see where their money is going but also should be given the opportunity to make their own decisions and take control. Policy makers should be aiming for a pension system that we can all be proud of, and the requirement for this will need more than a few short bursts of advertising.

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Submitted by PierrePierpont

Tuesday, 24th January 2012

They could start by making the state pension system fairer. 4% of state pensioners have their state pension frozen at the rate at which it is first paid on the basis of where they happen to live. 500,000 pensioners living overseas have their state pension uprated each year just as if they were living in the UK. Another 500,000, living in mainly Commonwealth countries have their state pension frozen. All have paid into the National insurance Fund under exactly the same rules. The same rules should be applied when you receive your state pension too.

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