Pensions

UK workplace pension schemes have returned some of the worst results for its savers – out of nearly all other countries in the developed world over the last decade - says the Organisation for Economic Cooperation and Development (OECD).

And the result of such dire performance by pension providers means that people’s dreams of a comfortable retirement could be left in tatters, the international think tank has warned.

British pension company returns fell 0.1% every year between 2001 and 2010 while nearly all other developed countries – except Spain and the USA - saw their pension pots swell. Chile’s increased by an average of 5% a year, while Poland returned a healthy 4% and Europe’s economic powerhouse, Germany, 3%.

In its OECD Pensions Outlook 2012 report, it pointed to a growing role for private pensions in closing the gap between pre and post retirement income.

Extending working lives would help, said the OECD, but ‘planned increases in retirement ages are generally insufficient to address expected rises in life expectancy’.

The OECD said that the introduction of auto-enrolment pensions to the UK in October 2012, for all workers not currently covered by private pension plans, should increase the uptake of occupational pension schemes, currently 43.3% of the working age population.

Darren Philp, Policy Director at the National Association of Pension Funds, said: ‘Investment performance has been very poor because of the exceptionally weak worldwide economic environment. UK funds are broadly in line with the global average but that performance is disappointing nonetheless. Final salary pension schemes have generally been moving out of equities in recent years as they attempt to trim their exposure to risk.

‘The UK will struggle to pay for its retirement and the weak returns of recent years make it even more important that we improve these pensions. Strong workplace pensions are a must.’

More details are available from the OECD website.