A shake up of the pension saving system is in order following numerous disappointments, independent policy advisor Dr Ros Altmann has said.
According to a report conducted by Ros Altmann for MetLife, many people wish that they hadn't bothered with a pension, as the credit crunch has caused the stock market to fall, taking pensions with it.
And, as a result, the pension
saving system needs to change: "Essentially, the entire UK pension system has been based on a bet that equities would always do well enough over the long term to reliably deliver good pensions," she said.
"The bottom line is that financial theory tells us nothing about whether any particular pension investors will actually benefit from the equity risk premium at all," she added.
And, as a result, people did not expect their pension pots to do as badly as some have, "Nobody explained to workers that they were effectively gambling their future security on the stock market," Dr Altmann concluded.
According to Dr Altmann, pensions must provide both secure income and high investment
returns, both of which have not been provided for current retirees who have been saving into a pension.
Key points for pension reform, according to the report, include advice and understanding of the risks involved, while possible solutions include insured pensions, or unit-linked guarantees which can provide guarantees in return for a premium.
"Everyone who lives in a house knows that they face the risk of burglary, fire or flood. If you cannot afford to lose much of your pension savings you can now consider insuring against this eventuality," Dr Altmann said.
And as inflation for the elderly continues to be 70 per cent higher than the CPI rate of 2.3 per cent, retirees may need their pensions now more than ever.
Commenting, Shona Dobbie, head of the Alliance Trust Research Centre said: "The benefits of falling prices are coming through more slowly for the elderly.
"This is a particular problem at the moment as it is older people, who frequently rely on income from savings
, who are also suffering the negative impact of very low interest rates."Get pension quotes and advice »
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