OECD hits out at pension plan

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The Independent Online

The Government's plans to enrol people automatically in pension schemes are flawed because the contributions are too low, an economic think-tank said yesterday.

The report by the Organisation for Economic Co-operation and Development (OECD) about the global state of pensions said the UK was right to launch its "auto-enrolment" scheme in October because voluntary schemes were not viable. But it urged Britain to copy Australia, which demands citizens contribute 12 per cent of their income towards their retirement pot.

At present, the UK is proposing a mandatory contribution of only 2 per cent, rising to 8 per cent in a few years.

"Bold action is required," said OECD's secretary-general Angel Gurría, below, who warned that voluntary schemes in countries such as Germany and the US had been bad news because "large segments of the population can expect major falls in income on retirement".

Pension reforms over the past decade have left many people facing payouts that will be 20-25 per cent lower than previously expected.

The OECD warned the picture will worsen as life expectancy rises over the next half-century, meaning the pension age must also rise.