Simplification is the key - Centre for Policy Studies

To some extent the Government has a right to “encourage” saving for retirement
because some people do fall back on the state through the benefits system in
retirement. A society with a savings culture would lead to less pensioner poverty and
more (long-term) investment. This would improve economic growth, leading to a better
quality of life for our citizens.
But how strongly should the Government exercise this right? Auto-enrolment, relying on
inertia, is now increasingly acceptable (NEST, for example). But introducing any form of
true compulsion is politically difficult. It is no coincidence that those countries where
there is compulsory (employee) saving tended to have authoritarian governments at the
time it was introduced (notably Chile in 1981 and Hong Kong 129 in 2000). The debate is
not new in the UK; in 1940 Keynes advocated that instead of raising taxes, the
government should require compulsory savings contributions from all taxpayers (to pay
for the war).
129 The Hong Kong Mandatory Provident Fund requires contributions of 5% of income from both employee
and employer (subject to maximum and minimum levels of monthly income, currently $20,000 and $5,000
respectively).
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