No more pensions by 2050?
Filed under: Pensions
Private pensions will "cease to exist" by 2050 due to young people's lack of interest in saving for retirement, an expert has warned.
Michael Johnson at the Centre for Policy Studies told the Daily Telegraph newspaper that private pensions would cease to exist within 30 years because young Britons do not want to give up access to their savings for decades to come.
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His comments come after recent research showing that just 12% of people in their 20s and early 30s are paying into a pension, despite the Treasury offering tax relief on retirement savings.
"Pensions will cease to exist before 2050. The word 'pension' does not resonate with Generation Y. Immediate access to savings is far more important to them than the 20% bribe that is tax relief," Johnson said.
He believes that the best way to ensure future generations of pensioners have enough to live on is therefore to encourage 25 to 34-year-olds to save into tax-efficient ISAs that they can dip into if they need some extra funds.
"The fundamental problem with pension saving is that if you are someone who is 25 today, it is going to be 45 years before you can touch it.
"That is just insane, particularly when you are struggling with very high housing prices and college debts," he said.
Johnson's comments are a blow to Government efforts to boost pensions through its auto-enrolment scheme, which obliges companies to enrol staff in pensions - especially as he also argues that young people today should only invest in workplace pensions if their employer is making "sizeable" contributions and they are 40% taxpayers.
Under sweeping changes to pensions that began this year, the plan is for up to 11 million more workers to have been automatically enrolled into a pension scheme by 2018.