The U.K. is heading towards a youth unemployment crisis
because people arent saving enough to retire.
Thats the warning from Euan MacLaren, the London-based
head of Natixis Global Asset Managements
institutional business in the U.K. and Ireland, who has been
discussing potential pension reforms with government
MacLaren met with officials at the U.K. Department for Work
& Pensions prior to the beginning of purdah a closed
period when British civil servants cannot hold such meetings
prior to a general election. The government officials have been
meeting with asset management firms as part of an evaluation of
what age people should be automatically enrolled in retirement
There is a growing understanding that if a 70-year old
doesnt move on and retire, then a company may not feel
able to hire the 16-year old trainee that they would usually
hire, MacLaren said in an interview. You will get
social unrest from youth unemployment and then you have a major
social issue on your hands.
The U.K. Department for Work & Pensions declined to
comment on its review of auto-enrollment due to
Britain began requiring its largest employers to
automatically enroll employees in retirement savings plans in
2012. The obligation, which started with employers with more
than 250 staff, has been gradually rolled out to
increasingly smaller U.K. firms. The government aims for 11
million people to be auto-enrolled by 2018.
Francois Barker, the head of Eversheds
Sutherlands pensions group, agreed with MacLarens
view that Britons retirement delay is creating a lack of
job openings for youngsters, saying the issue doesnt get
much attention because its a decades away
issue for politicians.
If you have octogenarians that cant afford to
retire, they are going to be a drain on the state, Barker
said. If you have got lots of senior people still in
work, who are not moving on, then that is going to inhibit an
employers ability to recruit at the bottom.
Natixis has begun analyzing the mix of funds that are
offered by default in U.K. company pension schemes to assess
their appropriateness. The asset management firm is hoping to
publish its findings at the end of the summer, using some of
the information for its own sales process.
Companies are supplying defined contribution retirement
plans that are "fit-for-purpose, but not optimum, said
MacLaren. In many cases, a lot of the default funds are
not the best they could be.
He said that a lot of people will be nearing retirement and
realizing they dont have as much to retire on as
they thought they would.
Insurance firm Aegon said this month that it found that one in
seven people in the U.K. aged 55-65 are approaching retirement
without any pension.
There is a portion of the population who either feel
unable to or are unwilling to save for retirement, Kate
Smith, head of pensions at Aegon, said in a company statement
about its findings in the U.K. Others may consciously opt
out of a workplace pension perhaps for affordability