The future success of the UK pensions market requires a move to collective-based pensions, according to David Pitt-Watson, lead for the Tomorrow’s Investor programme at the Royal Society of Arts (RSA) and author of Building the consensus for a people’s pension in Britain.
Speaking at the Employee Benefits Pensions and Workplace Savings Summit on 1 February, Pitt-Watson said: “What we should do is take our money and put it in great big giant pots where we share the risk of longevity.”
Holland operates a collective-based pensions system, where there are cross-industry pension pots for the health service, metal workers and civil servants, respectively. This compares with the UK system, which operates occupational schemes.
Pitt-Watson also explored the problems associated with a defined contribution (DC) pension system. “It’s not just costs that have turned out to be a problem for DC, but the predictability of returns,” he said.
He added that collective-based pension schemes can offer far higher returns. “If a typical British person aged 25 and a typical Dutch person also aged 25 were both to begin to save for their pensions, both had the same life expectancy, both expected to retire on the same day and each year they set aside the same amount of money, the Dutch person in retirement would get a 50% higher pension than the British person,” he explained.