Squire Sanders has published a white paper on the key issues that affect the affordability of pension schemes.
The law firm’s paper, Pensions in the age of austerity, draws upon a two-part independently commissioned survey of employers, actuaries, trustees and other pensions industry professionals.
The three cultural aspects that respondents identified could undermine the success of auto-enrolment are:
- Savers assume retirement is too distant a concern and/or should be taken care of by the state.
- Pensions are too complex an issue to be understood by employees.
- People are prioritising more immediate demands on income.
The paper also puts forward 10 proposals to ensure the long-term viability of defined contribution (DC) pension schemes.
The proposals include:
- Stability and transparency in the principles governing tax reliefs for pensions.
- A coherent approach to how the tax system drives demand for competing workplace savings vehicles.
- Early access, subject to appropriate controls to prevent abuse, to encourage current and future generations of savers.
- Government to address the relationship between pensions savings and funding of long-term care needs.
- Benefit-in-kind tax relief should be increased for provision of financial advice to employees.
- Financial education basics should be introduced into the school curriculum.
Catherine McKenna, global head of pensions at Squire Sanders, said: “In this age of austerity, pensions savings is at a crossroads in the UK, with increasing liabilities and the new duty of automatic enrolment paving the way to a largely defined contribution pensions world.
“Our research underscores the parlous state of financial education. If the DC plan is the future, its success will require a balanced approach and collective effort by all stakeholders concerned, including the state and employers, to promote greater financial literacy and support more informed decision-making by employees.
“The role of employers is absolutely central to delivering good quality pensions and we believe employers need more help and encouragement via the regulatory framework.”