How can we make more people save? The $64,000 question for the next decade could be how can we make ...
How can we make more people save? The $64,000 question for the next decade could be how can we make more people save for their retirement? Otherwise we will all be facing a stark future.
The debate has so far centred on the hard aspects. There is no doubt we need to reform the state pension system. And personal accounts (PA), together with the essential elements of auto enrolment and mandatory employer contributions, could offer those under-saving or not saving at all a real opportunity to plan their retirement.
But this is not only about earnings links and new pension products. We face a massive challenge in turning around the savings culture in the UK, and we need to take account of softer issues as well.
The success of pension reform, and therefore UK savings, will hinge on effective communication. The Government needs to start this today and spearhead a campaign to promote the benefits of saving now for retirement, especially to those who have access to an employer's pension scheme. We cannot wait until 2012 and the introduction of personal accounts - we will only risk planning blight on a grand scale.
When PA-day arrives, and personal accounts are launched, we will need to promote these and make sure people understand the consequences of opting out and of staying in. The Government will have to demonstrate the interaction between auto enrolment and pensions credit, and be able to say confidently, where appropriate, it pays to save. Generic advice could also help people make this vital decision.
Making sure people do not opt out inappropriately is only the first step. But we also need to make sure people are able to freely access all sorts of advice - both generic and regulated and removing the RU64 rule is one way to open this up to customers.
Finally, maybe we have got the big question wrong. It is not just about encouraging more people to save, this is about encouraging more people to save more money.
Rachel Vahey is head of pensions development at Aegon