Pensions ‘need to become lifetime savings accounts’  January 27th, 2012

The way in which pensions are structured needs to be fundamentally changed in order for them to work successfully in the future.

Considering the way in which the pensions market is currently operating, Dr Ros Altmann, director general of Saga, explained that the current attitude of having to choose between having a traditional pension or nothing is likely to see many people falling into the latter category.

She explained that in her view, the auto-enrolment policy is not enough to rejuvenate the current market and there must be some changes made to adjust the way they work in order for them to work more like lifetime savings accounts.

Noting some of the changes that are taking place, she explained Association of British Insurers' chief Otto Thoresen was in the process of outlining some changes, such as letting young people use pension savings to pay off their student loans.

She explained this would be an effective alternative to them having their money locked away for years where they could not access it.

Noting that the same is true for the auto-enrolment scheme, Dr Altmann outlined how the system would not work well for millions of people, with low earners in particular being forced into using something that would not fit their lifestyle. 

"Pensions should become lifetime savings accounts that can be used for people's needs as their lives develop. I would urge the government to consider changing the design of pensions, and encouraging or requiring employers to contribute to other forms of saving for their staff," the pensions expert added.

Earlier this month, Saga commented on a new campaign from the Department for Work and Pensions that is seeking to encourage more people to think about starting to save for later in life and suggested that any steps taken can only be a positive thing.