November 28, 2005 | posted by Michael Baxter in Uncategorized |

With the Turner report into pensions to be unveiled this week, the UK pension crisis is set to sit centre stage of the economic debate in the days ahead.

Up to now the debate has been focused on the time we should retire. Writing in the Sunday Times David Smith, for example, suggested that in 2050, the average retirement age would need to rise to 69.8, just to keep the proportion of GDP transferred to each pensioner at the current level.

But Deloitte have been taking a good look at what other countries are doing.

In New Zealand something called the ‘Kiwisaver’ account will be introduced in 2007. This entails an automatic enrolment into a company pension, with any employee who does not want to take part having to opt out.

This contrasts with the Australian system, which has a compulsory occupational pension. It’s a similar story in Sweden, where there’s a compulsory system with no opt-out.

The Australian model entails a strong role for private sector pension providers in administering and managing pension savings. In New Zealand, the government collects contributions but allows management of accounts and investments by industry providers and fund managers. While in Sweden there’s a State-administered system with external fund managers chosen by the individual employee - there’s no employer role in selecting the fund.

Finally, as for level of contributions: In Australia current contribution levels are 9% of salary. In New Zealand there’s a minimum employee contribution of 4% of earnings but they may choose to contribute 8%.

Mark FitzPatrick, Head of the Insurance Practice at Deloitte said, “The complexity of the pension arena means that a ’silver bullet’ solution to the pensions’ crisis is a pipedream. Consumers, employers and the financial services industry alike will be affected by whatever recommendations Turner makes next week. Depending on the recommendations, the 30 November could trigger a sea change in pension provision with huge significance for the whole of the UK from the man on the street up to the chairmen of the big financial institutions.”