WASHINGTON--(EON: Enhanced Online News)--A new issue brief offers the first detailed analysis for U.S. audiences on the U.K.’s new retirement policy initiatives. Faced with a daunting retirement savings shortfall, U.K. policymakers instituted a series of reforms that has expanded retirement plan coverage for workers.
“Ten years ago, Congress clarified that employers could use automatic enrollment features to nudge employees to save for retirement. But sadly, the rate of retirement plan coverage is lower today than it was in 2006”
The United Kingdom’s New Retirement Savings Program is the latest issue brief from the National Institute on Retirement Security (NIRS). It is co-authored by John A. Turner, director of the Pension Policy Center, and Jennifer Erin Brown, NIRS manager of research.
As outlined in the research brief, the U.K. reforms require all employers to automatically enroll their employees in retirement savings account. Also, employers are required to contribute to the retirement plan if an employee participates, although individuals can opt-out. The U.K. also sponsors its own retirement plan – the National Employment Savings Trust (NEST) – so that all employers are able to offer their employees a plan.
The new reforms are being phased in over time and will be fully implemented by 2018. During the remainder of 2016 and in 2017, U.K. employers with 30 or fewer employees will enroll their employees in a plan. Already, the U.K. has expanded coverage by six million workers. The total increase in coverage of nine million workers is expected when the program is fully implemented in 2017.
“U.S. policymakers would be wise to examine the reforms the U.K. has implemented. We have a deep and serious retirement savings shortfall in the U.S., and legislative efforts that attempted to move the needle on retirement savings and coverage have failed,” said Jennifer Brown, report co-author.
In the United States, nearly 40 million – or 45 percent – of working-age households do not have a retirement account, such as a 401(k) plan or an Individual Retirement Account (IRA). This shortfall in retirement savings means that the typical working household has virtually no retirement savings, and more than more than three out of five near-retirement households have less than one times their income saved for retirement.
“Ten years ago, Congress clarified that employers could use automatic enrollment features to nudge employees to save for retirement. But sadly, the rate of retirement plan coverage is lower today than it was in 2006,” said Diane Oakley, NIRS executive director. “The experience across the pond is proof for policymakers of the power of auto-enrollment when it’s working at full capacity. In fact, many U.S states that are taking steps to help working Americans have a financial stability in retirement are considering similar automatic enrollment practices,” she explained.
Brown added, “As evidenced by the recent elections, middle class Americans are angry about their economic security, and retirement is a big part of that equation. If newly-elected policymakers are going to deliver the economic security that they promised on the campaign trail, they will take action to address America’s retirement crisis. We hope this research contributes to a serious examination of policies in other nations that are working and making real progress towards closing the savings and coverage gaps.”
The National Institute on Retirement Security is a non-profit, non-partisan organization established to contribute to informed policymaking by fostering a deep understanding of the value of retirement security to employees, employers and the economy. Located in Washington, D.C., NIRS’ diverse membership includes financial services firms, employee benefit plans, trade associations and other retirement service providers. More information is available at www.nirsonline.org. Follow NIRS on Twitter @nirsonline.