UK reviews international pensions ahead of 2012 reforms
UK/GLOBAL - The UK Department for Work and Pensions (DWP) is digesting the results of a report on international pension reform.
The study concludes that while sucessful reforms stimulate private pension savings, a key challenge is communication and engagement with employers, employees and providers.
The University of Bristol's Personal Finance Research Centre noted in its report that several of the countries analysed reported a "much higher than anticipated" voluntary participation in reformed pension schemes among individuals not required to join.
However, this appears to have been driven primarily by financial incentives in countries such as New Zealand, or the expectation of improved benefits in retirement in Poland and Uruguay.
The report studied the pension systems of Australia, Canada, Denmark, New Zealand, Norway, Poland, Sweden and Uruguay to inform the implementation of the UK's pension changes currently scheduled for 2012.
The reforms covered by the report ranged from automatic enrolment into the KiwiSaver in New Zealand, the closest system to the proposed UK reforms, to mandatory DC elements to schemes for employees in Norway, Denmark, Poland, Uruguay and Sweden.
Most of these reforms have taken place in the last 20 years, with the KiwiSaver introduced in 2007.
However, the review suggested a lack of information on the impact of the reforms on the pensions industry or national pensions markets.
New Zealand's Retirement Commission, the report highlighted, believes reforms attracted new pension savers and stimulated the pensions market, allowing pension providers to reverse declining membership, while pension providers believe the KiwiSaver has also boosted the managed funds industry.
In Poland, however, the introduction of mandatory pension saving has meant the equity investment of pension funds has quickly become significant relative to the overall size of Poland's financial market.
However, the benefits of this for some markets appear to have been short-lived, and the report noted concerns about the negative impact of large institutional investors on underdeveloped financial markets.
The report follows the recent announcement by the UK coalition government last week that it had initiated a review of the 2012 pension reforms, including a consultation on workplace auto-enrolment and an increse in the state retirement age. (See earlier IPE article: Public consultation launched into changes to UK state pension)