The new pension system in the UK is "not fit for purpose", according to a former government advisor on pensions Ros Altmann.
Writing in a blog post, Dr Altmann argued on a matter of issues, such as auto-enrolment pension funds not being flexible enough, employees being complacent with their payments, and the default options on standard schemes not corresponding with modern 21st century lifestyles.
Dr Altmann wrote: “Defined contribution pensions are not fit for 21st century lives. New thinking on both pensions and retirement is urgently required and those who want the best chance of better incomes will need to plan carefully for the future.”
The UK government is currently rolling out auto-enrolment, which aims to attract 11 million new pension savers and remove the earnings-related factors to future pension payments.
Dr Altmann's arguments come in conjunction with separate research by protection provider MetLife, which revealed that 60 per cent of savers do not understand defined contribution pensions properly, especially among those aged between 18 and 24. Furthermore, the Office of Fair Trading stated last month that such contribution schemes offer poor value for savers, and asked for both the Pensions Regulator and the insurance body the Association of British Insurers to investigate into schemes that take advantage of their customers.
There is also the argument that attitudes among individuals in their 50s have changed in recent years. The MetLife study highlighted that 54 per cent believed that they will not be 'old' until they reach their 70s, while 28 per cent went as far as to say that one did not become 'old' until they hit their 80s. Only a quarter were planning to retire immediately, and 49 per cent of those in their 50s were aiming to work beyond the retirement age of 65.
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