Leading pension consultants Malcolm Small and Ros Altmann say the UK pensions sector is no longer fit for purpose and is in urgent need of a radical overhaul.
Small, editor of The Pensions Report 2007 due for release in October, says this year’s report shows the pension crisis is steadily worsening, with ever-increasing numbers of consumers opting for buy to let and Isas as an alternative to pensions.
Small, who is managing director of Lyncombe Consultancy, says: “I am increasingly convinced that the UK pension sector is no longer fit for purpose. It does not work any more.
“There are two aspects of the pension system that consumers do not like. They do not like having to buy an annuity and they hate not having access to the money until normal retirement date. Until we reform pensions, we are not going to get that engagement from consumers.”
Altmann believes that private pensions are no longer suitable for the vast majority of people. She says: “The young especially are not well served. The Government does not seem to understand the impact that means-testing has on the incentive to save. If you cannot be sure at the beginning that you have put your money in the right place, then you probably should not be doing it.”
But Hargreaves Lansdown head of pensions research Tom McPhail says if the issues surrounding the open market option and the discrepancy between private and public sector pensions are addressed then the current system is fit for purpose.
He says: “There are areas of the pension system that require urgent attention but I do not think that the system is entirely broken.”