By Daniel Martin

Last updated at 4:27 AM on 1st August 2011

Almost three-quarters of people working in the private sector would be unable to 'adequately exist' when they retired, a report warned last night.

It said as many as 14million workers would retire with pensions far smaller than those enjoyed by their parents, because they had not saved enough into schemes and because the current system was far too complex.

The report, written by former Treasury select committee chairman Lord McFall, said the 'golden generation' of retirement schemes had come to an end - and that many workers retiring after 2020 should expect a 'bleak old age'.

End of the line: The report said the 'golden generation' of retirement schemes had come to an end - and that many workers retiring after 2020 should expect a 'bleak old age'

End of the line: The report said the 'golden generation' of retirement schemes had come to an end - and that many workers retiring after 2020 should expect a 'bleak old age'

The Workplace Retirement Income Commission study said staff should be offered a better deal from pensions if they were to save enough for their retirement.

Lord McFall said: '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 aren't saving enough to secure a decent retirement. People need to get more bang for their buck, or they're not going to bother with a pension.

'Instead, they'll end up spending today, ignoring tomorrow and scraping by in poverty on the state pension. We cannot stand by and let that happen.'

The complacency of many in the  pensions industry was alarming, said  Lord McFall.

Warning: A report has revealed that almost three-quarters of people working in the private sector would be unable to 'adequately exist' when they retired (picture posed by model)

Warning: A report has revealed that almost three-quarters of people working in the private sector would be unable to 'adequately exist' when they retired (picture posed by model)

The commission said fee structures were too 'opaque' and too many people were being short-changed by their annuity choice.

Workers in defined-contribution pensions were being left to carry all the risk of funding their retirement and were often 'at the mercy' of stock markets, said the report. Trust in pensions was low, it added, and called for a permanent, independent commission to be established to take the politics out of pensions.

Lord McFall said: 'Sadly, millions of people are being left to navigate a pensions minefield that would puzzle Einstein.

'We're seeing less saving and lower trust in pensions, and that's a vicious cycle that cannot continue.'

Automatic enrolment of staff into company pension schemes – due to begin next year – would help, 'but it's a halfway point, not the final answer'.

Lord McFall added: 'More needs to be done. We hope this report will be a catalyst for discussion about the bigger picture.

'There's no point in bringing people into pensions that will erode their savings through high fees.

'The Government should set a clear ceiling on the charges that will be allowed under auto-enrolment.

'Annuities stand out as an area sorely in need of a shake-up. People are being short-changed by the current system.'

 

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