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Pensions system in ‘urgent need of reform’

The UK pensions system is in ‘urgent need of reform’ after it emerged that some 14 million people do not have a workplace pension.

According to a recent review by Lord McFall, the former chairman of the House of Commons' Treasury Committee, millions of people are facing a ‘bleak old age’ due to ‘critical problems’ with pensions in private firms.

Commissioned by the National Association of Pension Funds (NAPF), the review also found that employees in workplace pension schemes are often overcharged for a service that is ‘complicated’ and ‘inefficient’.

‘Too many people are stuck in a complex, costly and inefficient system that relegates the consumer's interest to second place. On top of that, they simply are not saving enough to secure a decent retirement,’ said Lord McFall.

‘People need to get more bang for their buck or they are not going to bother with a pension. Instead, they will end up spending today, ignoring tomorrow and scraping by in poverty on the state pension. The complacency of many in the pensions industry is alarming.’

Starting from 2012, employers will be required to automatically enrol eligible workers into a qualifying pension scheme and pay a minimum contribution into the fund. Employees will also be required to contribute to the scheme.

However, the review said the government should consider increasing the minimum amount that is contributed by these workers.

Pensions Minister Steve Webb described the report as ‘a wakeup call’, while Age UK ‘warmly welcomed’ the review.

‘Government action is critical now to ensure those with small pension pots do not lose out any longer,’ said charity director Michelle Mitchell.