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Communication and incentives drive successful pension reform

Press release issued: 6 July 2010

As the Government prepares for ambitious pension reforms, researchers from the University of Bristol have identified the key to success – or failure – as evidenced by other countries keen to cut public spending and encourage an ageing population to save for retirement.

2012 could see a series of pension reforms implemented by the new coalition Government, including cuts to public sector pensions, changes to employer and employee contribution commitments, and the introduction of a trust-based occupational pension scheme.

To inform those changes and to estimate the likely impact, Bristol’s Personal Finance Research Centre (PFRC) was commissioned by the Department for Work and Pensions (DWP) to conduct a review of international pension reform, focusing on eight case study countries - Australia, Canada, Denmark, New Zealand, Norway, Poland, Sweden and Uruguay – all of which (with the exception of Canada) instituted reforms in the last 20 years.  

One of the key findings of the report was the need for time to consult with stakeholders, employers, employees and the pensions industry, and the importance of communicating the right messages at the right time. 

The report’s authors conclude that while time-consuming, changes need to be debated thoroughly, given that “the benefits of building a consensus around the proposed changes are considerable”.

Unless existing systems can be used, they suggest taking the time to establish appropriate and robust administrative systems - the more complex the system and the greater the volume of business involved, the longer the time required.

The key implementation challenges faced by some of the case study countries were the length of the legislative process, opposition from stakeholders and the logistics of setting up and running a new or reformed pension system.

Financial incentives paved the way for successful reform in countries like New Zealand, while in Poland and Uruguay, it was the expectation of better retirement benefits that motivated more people to take up defined contribution schemes, leading to higher than anticipated voluntary take-up. 

However, in countries where there was no compulsory requirement for people to contribute, only a small number of people did so, citing other financial priorities such as mortgage payments.


Further information

The report, Review of international pension reform, by Sharon Collard and Nick Moore, can be viewed in full via the DWP’s website:
Please contact Aliya Mughal for further information.
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