Chris Wagstaff, Head of Pensions and Investment
Columbia Threadneedle, and Senior Visiting Fellow, Finance Faculty, Cass
Robin Ellison, Visiting Professor, Cass Business School
Louise Farrand, freelance journalist and former editor,
Pensions Insight and Engaged Investor
This paper takes a comprehensive look at pension systems worldwide and the
factors which contribute to that all-important holy grail: generating a
comfortable retirement for savers.
There are considerable challenges. Indeed, pension systems across the world
may be as disparate as the people they serve, but they all have one thing in
common. They are under pressure.
All over the world, people are living for longer.
As longevity consultancy Club Vita points out, in the UK the likelihood of
dying between 65 and 75 has halved over the lifetime of someone born in the UK
in 1949. Although rates vary from region to region, overall, there is a
pronounced upward trend in life expectancy across the world, too. According to
data from the World Bank, the average life expectancy globally in 2006 was just
under 70; in 2014 it was 72.
However, while we are living for longer, the level of pension provision
isn't keeping pace. Of course, some countries have better prepared for this
than others. Indeed, some retirement systems have been reformed to bear the
added weight of the extra years while others are buckling under the strain.
So where does the UK fit in? The government and regulators have made
significant strides to improve the system in recent years though it has been a
long time coming. In 2005, the Turner Commission's central two recommendations
were the introduction of auto-enrolment and simplification of the state
pension. Both of these goals have now largely been achieved. Yet the UK
government has taken a dramatically different ideological direction with the
introduction, in April 2015, of pension freedom and choice, whereby retirees
are no longer compelled to annuitise their pension pots. This is discussed in
relation to other countries throughout the paper.
Other challenges remain. The UK population is not saving enough for its
retirement, despite auto-enrolment being successful so far. This paper looks at
how technology and the harnessing of behavioural techniques to engage people
will help to close the gap. It also highlight the inequalities that exist in
the current system - the intergenerational and gender gaps that remain, not to
mention those social groups disenfranchised from and under-represented in the
current system - and how these should be addressed.
The paper can be downloaded at the link below.