- People need incentives to save
- Pensions need to be more flexible
- Pension funds should be available for 'lifestyle events'
Nick Scarrett, head of investment and pensions at Fair Investment Company, calls for major pension reform.
"The coalition government has already agreed to end the rules requiring compulsory annuitisation at 75, and while this is a positive move as it gives people much more choice and flexibility about how they want to make use of their pension, more needs to be done.
"The Department for Work and Pensions (DWP) estimates that around seven million people are not saving enough to deliver the pension income they are likely to want, or expect, in retirement. It also estimates that the number of people aged 65 and over will double by 2055.
"In order to try and tackle the problem, the previous Government was due to launch the National Employment Savings Trust (Nest), a flagship scheme whereby employees were to be auto-enrolled into workplace pension schemes unless they opted out, the idea being this would help encourage people to save for retirement.
"Now the coalition Government is in power, the future of the Nest scheme is unknown. They have pledged a thorough review into the pensions system in the UK, and we will have to wait until September to see what comes from this, but whatever happens, any reform needs to be radical to have any real affect on people's attitudes to pensions.
"People need more incentive to save into a pension scheme - just trying to force people into saving will not solve the problem – we need to look at the reasons why people are not investing into pensions and do something to make them a more attractive savings vehicle.
"In my mind it is essential that pensions are made more flexible. Savers need to be allowed early access to their funds for specific purposes – big lifestyle events such as getting married, buying a house or sending a child to university.
"In the current system, someone in their 20s sees a pension as something that is eating away at their earnings and cannot be of any benefit for 40 years, so it is no wonder many are uninterested in starting saving for their retirement.
"But if there were to be some rule whereby savers could use their pension for certain, pre-defined instances, such as putting a deposit down on their house, younger people would be able to see pension saving as much more relevant to them."