This week brings a timely reminder that as well the debt crisis, there is also the savings crisis to contend with. The problem with savings is that people aren’t saving. Or, in many cases, aren’t able to save due to rising living costs not matched by salaries. I read an article saying that just 33% of private sector employees are paying into a pension. Pensions have become passé.
It is hardly surprising that people have quit pensions given the weak economy and lack of confidence in the reliability of pension products and other savings schemes. It is a nonetheless worrying trend though. So what’s the solution?
The government hopes that new legislation – to take effect in October – will reverse this trend. This will see all employees being auto-enrolled onto pension schemes, unless they ask to opt out. The consensus among pension experts – of which I am not one – is that this is a positive move. Certainly decisive action was needed.
However, if building the number of employees in pensions back up is seen as a big challenge, an arguably bigger one is to rebuild public confidence in pensions and savings schemes.