Squire Sanders launches pensions white paper

Squire Sanders has published a white paper on the key issues that affect the affordability of pension schemes.

The law firm’s paper, Pensions in the age of austerity, draws upon a two-part independently commissioned survey of employers, actuaries, trustees and other pensions industry professionals.

The three cultural aspects that respondents identified could undermine the success of auto-enrolment are:

• Savers assume retirement is too distant a concern and/or should be taken care of by the state.
• Pensions are too complex an issue to be understood by employees.
• People are prioritising more immediate demands on income.

The paper also puts forward 10 proposals to ensure the long-term viability of defined contribution (DC) pension schemes.

The proposals include:

• Stability and transparency in the principles governing tax reliefs for pensions.
• A coherent approach to how the tax system drives demand for competing workplace savings vehicles.
• Early access, subject to appropriate controls to prevent abuse, to encourage current and future generations of savers.
• Government to address the relationship between pensions savings and funding of long-term care needs.
• Benefit-in-kind tax relief should be increased for provision of financial advice to employees.
• Financial education basics should be introduced into the school curriculum.

Catherine McKenna, global head of pensions at Squire Sanders, said: “In this age of austerity, pensions savings is at a crossroads in the UK, with increasing liabilities and the new duty of automatic enrolment paving the way to a largely defined contribution pensions world. 

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“Our research underscores the parlous state of financial education. If the DC plan is the future, its success will require a balanced approach and collective effort by all stakeholders concerned, including the state and employers, to promote greater financial literacy and support more informed decision-making by employees.

“The role of employers is absolutely central to delivering good quality pensions and we believe employers need more help and encouragement via the regulatory framework.”