The Workplace retirement Income Commission (WRIC) report published on 1 August suggested the government concentrates on how to increase pension savings contributions for both employers and employees and urged ministers to put a cap on high pension charges.
The independent commission on pensions’ savings said employees “must get a better deal” and warned that with a cap on charges, “the government could leave itself open to complaints about mis-selling.”
“People need to get more bang for their buck or they are not going to bother,” said Lord McFall, chair of WRIC.
The commission warned that the current contribution rate of eight per cent will not be enough in the future and proposed to hike the minimum compulsory contribution rate by 2017.
However, the Association of British Insurers’ director for life and savings, Maggie Craig, was quick to defend the industry against allegations of over charging.
“Saving into a defined contribution pension scheme remains the best way to save for the vast majority of people,” said Ms Craig.
“Employer contributions and tax relief add to the value of the pension pot. Most providers offer charges of less than one per cent. This covers the advice and investment expertise needed to make sure people get a decent return on their savings,” she argued.
She said the WRIC report focuses on past performances rather than future prospects.
“We should all be focused on the future, getting reforms already agreed right and kick starting a savings culture in the UK. Unfortunately this report focuses on the past, saying nothing that hasn’t already been said before,” said Ms Craig.
“The issues it raises should not be dismissed but are already on the agenda and being actively addressed. The shift to the new pensions world is already underway and it’s time to look forward rather than back,” she observed.
The CBI employers association was not receptive of the report either.
“The current plan to introduce a floor of eight per cent saving from next year remains the best way to ensure more people who can afford to save do so,” said Neil Carberry, director for employment at the CBI.
“This level was chosen by Lord Turner’s pensions commission to deliver a pension at a level hard-pressed employers and employees could afford. Further increases in the minimum contribution would put employers and employees under even greater financial pressure, and may drive people away from pension saving altogether,” he added.