Collective pensions could provide a 33% better outcome than individual provision, according to a report by David Pitt-Watson (pictured), lead for the Tomorrow’s Investor programme at the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA).
The Collective pensions in the UK II report, which follows on from its first report in January 2013, evaluates how collective pensions would have performed over the past 57 years, carried out by Aon Hewitt.
The report concludes that:
- On the best like-for-like comparison, a collective pension would, on average, have outperformed an individual pension by 33%.
- In 37 of the past 57 years, a collective pension would have outperformed an individual pension.
- The variability of the pension, and thus the risk the saver would have taken, would be lower with a collective rather than an individual pension.
The government is currently consulting on defined ambition pensions, aimed at improving both the amount and the predictability of the pension people receive for their savings, and ensuring sustainability in the UK pensions system.
Pitt-Watson said: “This is an opportunity to create a framework which would allow the growth of collective pensions in Britain.
“That may sound like a merely technical decision, but its impact on the retirement incomes of British people could be enormous.
”With the right choices, the young people of this country could be enjoying pensions that are 30% higher than those they will otherwise be entitled to. With the wrong decisions, our retirement system will be little more than a tax-advantaged private savings plan.”