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Pension contributions 'may need to be made compulsory'

  • @MLeftly

The state will need to make saving for pensions compulsory if the industry does not radically reform by 2017, a think-tank with the Government's ear will warn next month.

The Centre for Policy Studies, renowned for its links to Margaret Thatcher, is expected to argue that the pension industry is in "the last-chance saloon" of public opinion. The report's author, Michael Johnson, is well connected to leading Conservative ministers and was previously secretary to the party's economic competitiveness group.

Sources indicated that early drafts of the report suggest that if pension fund administrators cannot achieve a "transformational" change in people's attitudes to saving for their old age the state will have to intervene.

This would mean that the industry could have to slash its charges for overseeing pension funds, as central government will have done most of their work for them.

The report, entitled Put the saver first; catalysing a savings culture, has been reviewed by Labour and Conservative peers to ensure some cross-party support.

Mr Johnson has set five years as the deadline for an overhaul of the industry, as 2017 is when the review of the automatic enrolment in schemes will take place. Auto-enrolment is a policy coming in this year that sees people automatically placed in company pension schemes, but they can opt out. It is feared that people will choose to do so as finances remain tight and interest rates will probably increase.

If pension administrators fail to make it attractive enough for people to stay in the schemes, government should be "entitled to take far more assertive action", the report is said to argue.