Auto-enrolment will fail to solve the UK’s pensions crisis and the Government will be forced to introduce compulsory saving within 20 years, according to the Social Market Foundation.
A study by the thinktank, Jam Tomorrow: the next 20 years of savings policy, says the weak economy could fatally undermine auto-enrolment.
It claims that over the next two decades the Government will not be able to rely on individuals to save adequately for themselves and will not be able to support them.
To tackle the savings crisis, the study argues that the Government will need to turn to ever greater intervention such as compulsory saving or low-risk pension products.
It warns the increasing risks associated with pensions are also discouraging savers and praises solutions such as pension minister Steve Webb’s defined ambition proposals.
Defined ambition schemes would be a cross between defined benefit and defined contribution, aiming to offer some certainty of return for members.
SMF deputy director and author of the report Nigel Keohane says: “The Government will increasingly have to nudge, prod and regulate people to manage their personal income and wealth in ways that achieve beneficial outcomes for them and for society as a whole.
“That means considering policies like compulsory pensions saving, low-risk pension products and income-contingent loans for childcare.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “Something will have to be done but compulsion will not necessarily fix the savings problem. If you are a low earner then compulsory pension saving is potentially very bad news.”