Pensions - Articles - Fidelity comment on David Blake's analysis of UK pensions

  The aim of moving responsibility for retirement provision from the State to the individual has been at the heart of government pension policy for some time now but the real consequences of this for the individual has not been communicated openly.

 We agree that a 15% of salary lifetime contribution rate is a useful rule of thumb but we have to recognise the challenge of getting people there. The use of automatic increase programmes that increase contributions each year have proved very successful in the US. However, the success of these can only be realised if we automatically enrol people into them rather than relying on people to opt in to them. It would make sense that, in time, the use of automatic increase is made a condition of automatic enrolment plans.

 However, given we have yet to reach the minimum level of automatic enrolment contributions, insisting on this now would be premature. The costs and complexity of launching these facilities as standard features are not insignificant and so employers and industry will need time to put the necessary systems and processes in place.

 Richard Parkin, Head of Pensions for Fidelity International commented: “Save More Tomorrow ® or automatic increase programmes have proved to be effective in creating a disciplined approach to increasing retirement saving. A few schemes already operate this in the UK and we hope more will follow suit over the next few years. Even if their scheme doesn’t offer this facility, individuals can make their own retirement promise. By setting themselves the goal of putting 1% of any pay rise into their pension each year they can quickly find that, with the help of their employer’s contributions and tax relief, they are getting close to the 15% target that should ensure a comfortable retirement.”