The Royal Society of Arts think-tank has called for collective defined contribution pensions to be introduced in the UK
In a report published today it said that defined benefit schemes were 'withering away'. Therefore a new pensions framework was urgently needed if people were to maintain a good standard of living in retirement.
Collective pensions are commonplace in Denmark, the Netherlands and parts of North America. Savings are pooled in collective, rather than individual, pots.
According to Aon Hewitt research cited by the RSA, collective saving would have given UK investors a 33% better outcome, as well as a more predictable outcome, than individual savings over more than half a century. Collective pensions would have outperformed an individual DC pension in 37 of the past 57 years.
David Pitt Watson, head of the RSA's Tomorrow's Investor project, said: 'With the right choices the young people of this country could be enjoying pensions which are 30% higher than those they will otherwise be entitled. With the wrong decisions, our retirement system will be little more than a tax-advantaged private savings plan.
'The message is clear: united we stand, divided we fall. It will be through encouraging the growth of well governed, collective pensions that the UK will finally have a framework for private pension provision that is fit for purpose.'
Hari Mann of the RSA added that collective schemes would create boost pensioners' living standards.
'It is unacceptable that these, more effective pensions, which are available to Dutch and Danish citizens are effectively illegal in this country. British pensions should not become the poor man of Europe.'
With the government currently reviewing its position on collective pensions, now would be an excellent time for the Department for Work and Pensions to create a framework to allow collective saving, the RSA concluded.