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Pension plan B could be to invest in Isas

The Independent Longevity Centre has urged the Government to develop a “plan B” in case swathes of young people opt out of occupational pension saving when automatic enrolment begins in 2012.

In a paper entitled, Resuscitating Retirement Saving, published last week, the ILC suggests policymakers should extend auto-enrolment to allow young people to invest in more liquid savings accounts such as Isas if opt-out rates are high.

At a certain age, the ILC says this account would convert automatically into a pension saving account.

The report says: “This scheme would utilise young people’s apparent preference for short-term saving but offer incentives to retain capital over the long-term to provide a retirement income.”

Senior researcher Dr Craig Berry, who wrote the report, says: “There is evidence that young people are less supportive of automatic enrolment.

“The risk of not having a back-up plan is that if young people do opt out of occupational pension schemes and Nest, they will be lost to the pensions system.”

A Department for Work and Pensions spokeswoman says: “There is no plan B. Individuals will be able to opt out if they believe it is not in their best interest to save.”

Syndaxi Chartered Financial Planners managing director Robert Reid says: “Allowing some flexibility would make the auto-enrolment concept more attractive to young people.”

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