UK - Employer and employee pensions should be made compulsory if the UK’s 27 billion-pound (38.7 billion-euro) pension gap is to be filled, says market analysis firm Datamonitor.

“Britain is trying to move away from workers supporting pensioners by encouraging individual saving. However, large consumer segments are failing to contribute to a pension, causing an estimated 27 billion-pound shortfall in the amount needed to guarantee an adequate retirement,’ says Liz Hartley, financial analyst at Datamonitor.

Government efforts to increase take-up have failed, says the company, and many are not saving for retirement as they do not have enough cash to spare.

The only guarantee in filling the gap would therefore be to make pensions contributions compulsory – in particular for employers. “There is fairly strong support for compulsory pension contributions, while mandatory systems in Australia, the Netherlands, Sweden and Switzerland have worked well, achieving high levels of coverage” says Datamonitor.

But not all employees or employers should be included in the system. It is suggested that those workers on the lowest incomes would be better off relying on state support. Small employers or new businesses should also be excluded, says Datamonitor, but part-time and temporary workers should be included.

Pensions also need to be redesigned, says the research. Current pensions have suffered from heavy stock market falls and years of scandals. They, therefore, ought to be redesigned to offer poorer consumers a greater degree of security, using a more diverse mixture of easy-to-understand assets, such as property and cash.

"Moreover, a key reason why consumers are failing to save in pensions is that they lock away the cash until retirement. The UK should be more flexible and create products that allow consumers access to their savings through hardship funds or limited withdrawals," comments Hartley.

A survey of more than 300 companies by the Association of Consulting Actuaries (ACA) in June found that three quarters (76%) would support the introduction of minimum compulsory private pensions contributions from employees and the self-employed and two thirds (66%) would support the introduction of minimum employer contributions

The UK government has set up a Pensions Commission to look at voluntary pensions saving and considered whether there is a need for greater compulsion. Most of the survey (91%) expect the commission to recommend greater compulsion within a few years.