Britain's Pensions Crisis - Compulsion

8 November 2004

Some see compulsion as the answer to the Pensions crisis, whereas others are strongly opposed to this.

There has been much comment in the press over the past few weeks on compulsion following the publication of the so-called Turner Report (actually, it's The Pension Commission's interim report) giving the facts and figures behind 'Britain's Pensions Crisis'. Some see compulsion as the answer to the crisis, whereas others are strongly opposed to this. Here are a couple of thoughts on the issue to get you thinking whilst waiting until Adair Turner publishes his follow-up report next year.

1. If we are compelled to pay a certain % of salary into a pension scheme, why would the Government need to grant tax relief on pension contributions?

2. Australia is the much-quoted success story for compulsion - compulsory pension contributions of 9% of salary are required down-under. Yet, overall, the Savings Ratio for Australians seems to have stayed stagnant. This suggests that if people are compelled to save into one medium (pensions), they reduce their savings into other areas to compensate. If this is the case then is compulsion worth all the effort?

Much more on this over the coming weeks and months.