The United Kingdom is rolling out a broad retirement savings initiative that is far more ambitious than President Barack Obama's recently announced MyRA program, according to the Center for Retirement Research at Boston College.
Both aim to encourage retirement saving among workers who do not currently participate in employer plans, typically those with average to low incomes; both also steer new participants initially into low-risk investments, the center said in a report this week.
But the U.K. requires all employers to “auto-enroll” their uncovered workers, with the right to opt out. And the government created a new non-profit entity, the National Employment Savings Trust (NEST), to provide employers with high-quality, low-cost plans. In addition, the plans' target date funds start young workers with low-risk investments to avoid losses that could discourage saving.
While the U.S.'s new MyRA program includes low-risk investments and government infrastructure, it lacks auto-enrollment.
The U.K. initiative is a bold experiment. It aims to raise the retirement savings of those with the greatest saving deficits – average- and low-wage workers and those not covered by employer plans. And it aims to do that using the best contemporary thinking on retirement plan design," said Steven Sass, the report's author.
"President Obama’s recently announced myRA program has a similar ambition and also offers workers not covered by employer plans a low-risk, no-cost retirement saving option. The U.K. experience, however, suggests that take-up in MyRA could be low without auto-enrollment and matching employer and government contributions. U.S. 401(k) providers might also find other features in the U.K. initiative of interest, such as NEST’s TDF design in plans for average- and lower-wage workers."
"It remains to be seen if the new initiative succeeds and the United Kingdom avoids a future with “increasingly inadequate and unequal” retirement incomes. But it would surely arrive had the nation continued on its previous course," the report concluded.
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