New research has criticised the suggestion by Adair Turner's Pension Report recommending compulsory pension saving as a means of alleviating the pension crisis.
According to consultancy firm Mercer HR, the rising flow in the price of UK housing has made it difficult for first-time buyers to meet any kind of savings requirement.
Mercer says the mortgage cost for a first-time buyer on an average income increased from 32% of net pay in 2002 to 41% in 2004 with the relative comparative cost of housing against salaries has eating any prospective contributions.
Mercer adds if interest rates were to increase by 1%, as predicted, then 45% of average take-home pay would be needed to pay a mortgage.
Dr Deborah Cooper says: "Turner has put forward a number of suggestions about how we can close the gap between hope and reality for pension savings. While compulsory pension saving sounds like a pragmatic solution, it is unaffordable and unrealistic, at least for some."
With the deadline closing yesterday for public submissions and responses to the October-published ‘Turner report’, Mercer points away from a compulsory pension system and instead urges for a ‘reformed’ state system where the basic state pension is combined with the flat rate state second pension to offer a single, flat rate, integrated state pension which increases in line with earnings.
Mercer argues such a system would have to be set at a level for most people to avoid means-tested top-ups, while the eligibility age should be at a level to make it affordable.
“People could then make supplementary contributions when they were able to, for example, when their mortgages have been paid,” Mecer says.IFAonline
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