ANOTHER PENSIONS REVOLUTION
A radical overhaul of the pension structure might also be required to facilitate these more frequent periods of re-training.
Instead of locking up savings until retirement, people could be allowed earlier access to enable them re-position their careers.
Accessing the pension pot earlier in life would reduce the total amount available at retirement. But if people were able to re-skill through their life, they may be able to put off full retirement until later in life and so would not need such a large pot.
Some think this is dangerous. Cooper says: “Giving early access to long-term savings is just too great a temptation for most people.”
Accessing savings for re-training also puts a lot of risk on the individual. Cooper says: “What happens if the re-training does not work out? They will have sacrificed their long-term savings for no reward.”
Kate Smith, head of pensions at Aegon agrees: “There is a very real risk that people could lose the security a pension fund provides.”
A solution would be to make a part of the fund accessible. Smith says: “That could be, for example, limited to £10,000.” There would have be tight controls on why and when these funds could be accessed. Smith says: “There should also be a requirement to build these savings back up again once the employee had found a new job. And the individual shouldn’t be allowed to re-access their pension until the funds have been replaced.”
It would be more equitable to make governments bear the cost of re-skilling rather than the individual. This re-education of employed people could be funded via a common insurance program, says Cooper.
Smith says: “Ideally the government should provide retraining schemes throughout an individual’s working life, this would be far better than depleting pension savings.”
Cooper adds: “But the government will also have to run a parallel system to provide the necessary resources for the self employed which are a growing proportion of the workforce.”
Policy makers should do this sooner rather than later. Alison Porter, technology equity fund manager at Janus Henderson Investors, says: “Technology is improving at an exponential rather than a linear rate.”
Take the sequencing of the human genome. Porter says: “In the first seven years of the project, only 1% was sequenced.”
If the project had continued at that pace it would have taken 700 years to complete. But it only took another seven years to finish the project because of the rapid developments in technology, she adds.
The exponential pace of technological development creates challenges. Foster says: “It’s very difficult for a regulatory and policy environment to match this pace of change.”
To prevent a repetition of the mistakes seen under globalisation but on a larger scale, governments need to be grappling with these issues now. Smith says: “As people are working longer the government should be considering different mechanisms to enable people to re-train throughout their life including early access to retirement savings as well as other policy initiatives.”
