Fundamental changes needed to ensure fit for purpose pension system

Fundamental change may be needed to build a pension system that is fit for purpose, Link Group has said, after research revealed that nearly a third of (32 per cent) of UK adults don't feel like they're in control of their pension and retirement savings.

The group’s whitepaper, Time To Turn the Pensions Market Upside Down, warned that the UK Pensions industry is "fragmented", with no single authority setting the strategic long-term direction of pensions.

It also argued that this has had negative implications for savers, as research from the group revealed that more than half (52 per cent) of savers have a clear desire to be more involved in the management of their pension scheme.

In addition to this, over two thirds (67 per cent) of those with multiple pensions schemes want to combine them into one place, although 25 per cent felt that their pension provider has not made it clear what they are able to change in relation to their pension, while 27 per cent are unsure as to how those changes can be made.

It also found that just over half (54 per cent) of savers say that they trust their employer to pick the ‘best’ scheme for them.

However, research suggested that it is a “notably different story in Australia”, suggesting that changes are needed within the UK pension system to ensure it is truly fit for purpose, and member needs.

The group outlining three specific recommendations for discussion within the UK pension sector, including mandating higher minimum contributions.

Although Link Group acknowledged the current economic pressures, it argued that higher contributions would protect both member fund growth and the financial relationship with future selves.

Alongside this, the report suggested that members be given greater control, and be allowed to take their pensions with them by the creation of an industry clearing house.

It also called for a broader change in industry structure, arguing that a single industry body should be empowered to represent the interests of the whole UK industry, driving long term strategy for UK pensions.

RSS UK general manager, Richard Wilson, commented: “The disconnect between UK adults and their pension is both notable and unsustainable. Such lack of engagement and lack of control had led us to a worrying lack of understanding.

"The UK is certainly making small steps towards better member outcomes. But fundamental change is needed now in order to build a pension industry truly fit for members, for purpose, and for the future.

“Thankfully, there is a road map for success. Using the experience and insight gathered from the Australian system enables us to know not just exactly where we can make the necessary changes to drive better outcomes for members – retirement readiness, members’ choice, and industry structure, but crucially how these need to be reshaped.

"Successfully making this happen will be transformative not just for pension savers, but for the entire pensions industry. It’s time to turn the UK market upside down.’”

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