Speaking at the Corporate Adviser summit today, Whitehouse said that while auto-enrolment was often compared to New Zealand’s Kiwi Saver , that scheme introduced from a low base of 10 per cent participation in schemes nationally.
Mr Whitehouse said the UK was currently close to other countries with voluntary private pensions and that the scope to increase take up might be limited, given its current private pension participation rate of 50 per cent. While New Zealand had a clear run, the UK was focusing on enrolling on employees who have already shown a reluctance to join pension schemes. He also thought significant numbers who might enrol at first would eventually learn they could give themselves a 4 per cent payrise by opting out again later on.
He said pension policy was a delicate balancing act between benefit adequacy and financial sustainability and that governments needed to decide where they wanted to position themselves in this trade off. The UK was currently spending 6.5-7 per cent of national income on state pensions and that this would increase to 9 per cent by 2060. This compared to Italy where state pensions cost 14 per cent of national income.
Mr Whitehouse said the UK was still spending less than one would expect given demographic pressures and that the UK was one of only five OECD countries which would stablilise the amount of time pensioners spent in retirement.
He said the diverse nature of UK pension provision across state, public sector and private sector was beneficial, even if their assets were closely correlated. There was a huge range of diversification with the UK, US and Australia having less than 50 per cent of pension income deriving from public sector pay-as -go pensions, compared to 85 per cent in France and Hungary.