Auto-enrolment was a success but political parties now need to revisit it or risk a pensions timebomb, according to Ian Bell, head of pensions at RSM UK.
Speaking to FT Adviser, Bell discussed the need for a cross-party approach to pensions and called for parties to stop using pensions “to win votes” and instead take a long-term approach.
He said: “Political parties use pensions to win votes and they often use pensions from a tax raising perspective, which is short term type stuff for them to benefit from.
"When I came into the pensions industry it was quite healthy and flourishing and the UK was renowned globally for its pensions industry.
“When you go through your career, you hope to leave things in a better place than when you started. But I don’t believe, when I end my career in the next few years, we're going to be in a better position unless political parties can come together to actually start talking about pensions as a long-term issue.”
Bell said the last time parties came together auto-enrolment was introduced which got people contributing 8 per cent to their pensions but he warned that was no longer enough.
“We're now 10 years plus since auto enrolment was introduced, and I often hear it quoted as being a success. Now that depends how you define success.
"The definition people use for it is that we've now got however many thousands of working people contributing to a pension scheme they wouldn't have been doing before auto-enrolment.
“But if you look at it another way, you have members of the working population contributing to an auto-enrolled pension, believing that that's going to be suitable for them and it will give them a good retirement."
Bell pointed out that contributions needed to be increased from 8 per cent to 12 per cent but this could only be achieved if all parties worked together otherwise the population was heading for a “pensions timebomb” once auto-enrolled people start to reach retirement age and realise they do not have enough to retire.
“One of the challenges with anything, as we've seen over the years, is pension ministers come and go too soon. They use it as a platform and as a stepping stone to something else.
“The minister with the most longevity in recent times was Steve Webb, who is no longer an MP, but he saw through auto enrolment, and left a real legacy from an industry point of view. But in terms of current manifestos there's nothing recognising this issue,” he added.
Financial education
Bell also believed the levels of financial education in the UK needed to be better to help the population understand they must save more into their pension.
He said: “It's scary that the levels of financial education our younger people have are just nowhere near what they need to be.
“Martin Lewis does a great job, he raises the profile on stuff like this, because he's actually cottoned on that people don't understand what should be relatively basic things. And when you're planning something like a pension, and with the compound elements involved, it can become quite complicated.
