Thursday, 19 June 2014 11:59
'UK pensions industry mustn't throw baby out with bath water'
The UK should steer clear of just copying foreign countries' pensions systems and look at what works well already in the existing regime, an expert has said.
With the radical reforms to pensions announced by the Government this year, the industry should avoid "blindly following" systems used overseas according to Steve Groves, the chief executive of Partnership.
He said while lessons can be learnt from abroad the UK should not "throw the baby out with the bath water".
He told delegates at Westminster and City Retirement Income Conference: "Following the Budget, commentators have suggested a variety of countries approaches to pensions as a panacea for what ails the UK market.
"However, while there are certain lessons that we can learn, blindly following systems which see 50% of over-55s almost entirely dependent on means tested state pension (Australia) and 46% of people dying with less than $10,000 (US) is not the answer."
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"The picture in the US, which provides a far greater degree of flexibility and accountability than some countries, is less positive.
"It is estimated that over 40% of people run out of money before they die but annuities are the fastest growing retirement product in the States which suggest that many people want this type of security.
"Indeed, there are strong voices in America and Australia suggesting that compulsory annuitisation may need to play a part going forward."
Evidence from Switzerland – where 80% of people annuitise – suggests that generous annuity rates (6.8% – 2014) are key to consumer engagement, he said.
He also pointed to Denmark – after it was voted as the world's best retirement regime.
Mr Groves said: "A trip around the pensions globe clearly highlights that we have much to learn from other countries' successes - and failures – with regards to flexibility, security and education.
"However, while we welcome the challenges to provide consumers with better outcomes, we need to hold onto the aspect of the system that already work and use our expertise to avoid simply throwing the baby out with the bath water."
With the radical reforms to pensions announced by the Government this year, the industry should avoid "blindly following" systems used overseas according to Steve Groves, the chief executive of Partnership.
He said while lessons can be learnt from abroad the UK should not "throw the baby out with the bath water".
He told delegates at Westminster and City Retirement Income Conference: "Following the Budget, commentators have suggested a variety of countries approaches to pensions as a panacea for what ails the UK market.
"However, while there are certain lessons that we can learn, blindly following systems which see 50% of over-55s almost entirely dependent on means tested state pension (Australia) and 46% of people dying with less than $10,000 (US) is not the answer."
{desktop}{/desktop}{mobile}{/mobile}
"The picture in the US, which provides a far greater degree of flexibility and accountability than some countries, is less positive.
"It is estimated that over 40% of people run out of money before they die but annuities are the fastest growing retirement product in the States which suggest that many people want this type of security.
"Indeed, there are strong voices in America and Australia suggesting that compulsory annuitisation may need to play a part going forward."
Evidence from Switzerland – where 80% of people annuitise – suggests that generous annuity rates (6.8% – 2014) are key to consumer engagement, he said.
He also pointed to Denmark – after it was voted as the world's best retirement regime.
Mr Groves said: "A trip around the pensions globe clearly highlights that we have much to learn from other countries' successes - and failures – with regards to flexibility, security and education.
"However, while we welcome the challenges to provide consumers with better outcomes, we need to hold onto the aspect of the system that already work and use our expertise to avoid simply throwing the baby out with the bath water."
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