Should people be forced to save for their retirement?

Today, everyone who joins the new national pension scheme is enrolled as their firm joins the scheme, but everyone also has the right to decide that they prefer jam today over jam tomorrow, and to say they’d rather not join.

They have to stay on top of this if they want to stay out – they get automatically enrolled again every three years – but it is still perfectly possible to choose to spend your own money as you want. You have to wonder how long it is going to stay that way.

Whenever I talk to people in government or at the big pensions firms about auto-enrollment, it is clear that in the end they expect the opt-out bit of the deal to disappear. And now a think tank – the Policy Exchange – has come out and actually said it.

Their report, which you can download, suggests that some 11 million people are “at risk of entering pensioner poverty when they retire.”

Their solution is a new ‘Help to Save’ scheme, which would “make it obligatory for people to save for their retirement by removing the opt-out in the existing auto-enrolment scheme, while also increasing individual contributions to pensions as their incomes rise over time.”

So, any rise in your pay would come with a compulsory rise in your pension contributions with the target savings rate being not 8% of your income as it is at the moment, but 12%. More ‘Force-to-Save’ than ‘Help-to-Save’ perhaps.

On one level this makes total sense and it is a system used in many other countries such as Australia. But you might say that (while it is hardly leaving our pensioners lounging in the lap of luxury), we already have a compulsory opt-in to a pensions system – we are absolutely obliged to pay endless income tax to cover our state pensions.

Given that the minimum income a pensioner can sink to in the UK is about £7,500 a year (if you are on pension credits), you would think that would be enough on the compulsion front. Anything else is really just another form of financial repression – a way in which we are forced by the government to use our money as they want rather than as we want.

It would also provide our debt ridden state with a horrible temptation. How long do you reckon it would be before that huge pile of compulsory savings was mobilised to invest in government debt? (You know, to keep it safe.)

• While I’m not keen on the ‘force to save’ bit, the report does contain some interesting ideas on how we can improve the way we can draw down the savings we do have when we retire. It is worth reading for that bit.

  • Critic Al Rick

    What’s the point in saving into a Pension Pot when that Pot’s more than likely going to be raided by the thieving, kniving, unscrupulous, voracious Rich Parasites of the Quasi Public/Private Sector (incorporating Cartels, Pseudo Cartels, Monopolies, Pseudo Monopolies including Government)?

    Unless you’re a thieving, kniving, unscrupulous, voracious Rich Parasite of the Quasi Public/Private Sector (incorporating Cartels, Pseudo Cartels, Monopolies, Pseudo Monoplolies including Government.

  • Dr Feelgood

    I think this proves that Govt pensions are a ponzi scheme. Our pension money that we are paying in is being spent as we speak etc and not being put aside hence they are bringing in this scheme. Our country is run by crooks. Isn’t it obvious?

  • Critic Al Rick

    Any incentive in the Truly Private Sector for innovation or to work hard and save for retirement, should it still be there in any appreciable amount, is disappearing fast. The significance and importance of the Truly Private Sector will not be fully appreciated by the Rest until the latter have completely destroyed the former; until the Parasites have ‘killled’ their Host.

  • GFL

    Yes government pensions are just a giant ponzi scheme – when the money runs out they will come for your savings! Directly or indirectly!

    A majority of most people’s savings are in the value of their house – I predict a mansion tax coming into force within 15 years, although the name mansion will be dropped at some stage, it’s only included make people think it doesn’t impact them. Eventually very average houses will be included in this tax! You heard it here first!

  • Tyler Durden

    I will make provision for my own retirement and I will choose how my money gets to be spent, thank you very much.

    Pensions are legalised theft (I suspect many have subconsciously arrived at that conclusion) and I’m afraid that won’t save the government or the financial sector. Such an idiotic scheme would deflate wages, salaries and the real economy still further.

    Yep, things are going to get ever more desperate for those unproductives syphoning of the wealth of everyone else.

  • Ellen12

    No, I think people should not be forced to save for their retirement as saving, by political design, is a futile exercise – especially inside the pensions framework when government securities are a requirement. On one hand you have a government (and central bank) penalising savers and, on the other hand, we’re told we need to take care of our own retirement. They want us to spend everything we’ve got, borrow more and spend that while, at the same time, save large amounts for retirement.

  • floridahummer

    my dad had a small pension and as such was not entitled to basically anything
    yet his friend who had no pension and was a serious drinker could claim benefits
    galore and was better of ( and he had several years out of work because of his drinking problem ) don’t save spent it all have a good life then go running to the state saying you
    need money or work hard save your money and you get treated like dirt and get told to spend your hard earned saving or come from europe and get benefits having paid nothing in.
    and one day all are money will be gone and great Britain will be bust again

  • NeutronWarp9

    For many, the problem with money seems to be that you cannot take it with you. But why overly worry about squirreling away a huge pension pot? The more you save = the less handouts you will receive. It is not a difficult concept to understand.
    Then as you reach your non-earning twilight years you want free healthcare and support for life so that you can leave something for the kids and grand kids!! It all sounds very selfish, mean and uncivilised to me.

  • Realist

    Human nature dictates that the system in the long run will fail, as everyone wants to have their cake and eat it. The only way it will work is, do away with a national pension pot and leave it up to the individual to save for their pension, either forced or unforced. Then you only get what you put in, then the serial scroungers won’t get anything.