It has been revealed that the Government will need to make saving into pensions a compulsory act if the entire pensions industry does not go through a massive overhaul before 2017. This is the warning coming from a think tank who are close to the Coalition Government.
The Government seem determined to go ahead with their public sector pension reforms, even though unions are trying to block the changes.
Government to intervene
The think tank, known as the Centre for Policy Studies, will be arguing that the pension industry is hanging on by the thinnest of threads when it comes to public opinion and consumer confidence.
The report was written by Michael Johnson, who has heavy ties with Conservative ministers, and who was also the secretary to the Conservative party’s economic competitiveness group.
Close sources have highlighted some points from the first draft of the report, saying that if pension fund administrators fail in their attempts to alter the people’s savings habits, then there will be no other option left but for an intervention by the Government.
Consequently, this could mean that the industry will have to cut the charges that are placed on managing pension funds simply because central Government will have completed the bulk of work for them.
The report was given the title of ‘Put the saver first; catalysing a savings culture’, and was thoroughly reviewed by Labour and Conservative party members to make sure that that there was some support from the other parties.
Mr Johnson has set a target of five years, during which time the entire industry will go through a reformation. 2017 is also the year that auto-enrolment will be reviewed. This is the policy which that will be coming into effect from October this year, with workers becoming auto-enrolled into their company’s pension scheme.
Automatic enrolment opt outs
Even though these employees will be signed up to the scheme, but they will retain the choice of opting out at anytime they wish to. However, employers must re-enrol workers who have opted out after three years, and then repeat if the worker chooses to opt out again.
There is huge concern that many workers will choose to opt out because finances remain such a big stumbling block in this current economic climate. People are finding that their income doesn’t provide them with enough disposable income to save, especially after paying for bills and necessities.
The report said that the Government would be allowed to take a stronger stance should pension administrators fail to keep workers in pension schemes.
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