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06

Compulsion won't work, says pension minister

Open-access content 8th June 2016

Ros Altmann does not like the idea that people should be forced to save, a conference audience was told today.

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Her comments came in response to a question from the floor on whether compulsion from the UK government would encourage better pension saving. 

Speaking at The Future of Life & Pensions, organised by business media company Marketforce, the pensions minister said: "Compulsion for pensions saving is not something I would necessarily advocate. We have auto-enrolment. We have that option of opting out, which I think it's right."

She added: "If you force people to save it's just another tax. We want people to want to save. And hopefully we won't need to go down that compulsion route.

"And at what level do you compel? If you compel at a low level, nobody is bothered to do more. If you compel at a high level we will create other problems."

In order to encourage the public to save for retirement, Altmann called for better consumer protection and engagement through jargon simplification. 

"Most people don't need to know huge and complicated mathematics to understand pensions, it's just we haven't explained it in a language that they understand."

Another measure that the government recently introduced for better protection was the Pensions Bill, which was brought in to strengthen the regulation of the master trust schemes. 

Additionally, savers needed to feel there is value for money. In order to achieve this, Altmann said the government would crack down on "high and unfair charges" through a series of consultations. 

Last month the Financial Conduct Authority proposed a cap of 1% on the value of a policy on early exit charges for contract-based personal pensions. Separately, the Department for Work and Pensions launched a consultation on similar measures for occupational pensions. 

Altmann added pensions needed to be made fairer. As a result, the government will launch a secondary annuity market in April 2017. 

This article appeared in our June 2016 issue of The Actuary.
Click here to view this issue
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06
Topics:
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