Expert says revamp pensions U.S.-style

By Jennifer Hill

EDINBURGH (Reuters) - British workers should be automatically enrolled into workplace pension schemes which have "longevity insurance" built in, an American expert in the field said on Friday.

Roger Servison, president of Fidelity Brokerage Services Research in Boston, said an analysis of 30 years of defined contribution (DC) pension fund provision in the U.S. could help improve pension schemes this side of the Atlantic.

Assets in DC schemes, also known as "money purchase" plans, now greatly exceed those in defined benefit (DB) funds in the States, where three-quarters of workers are now covered by a DC scheme.

A huge shift from DB to DC provision is under way in Britain, because scores of DB funds -- usually more generous, because they are based on a worker's final salary -- have closed to new entrants as companies struggle with huge funding deficits.

These have been racked up due to poorer investment returns and increasing liabilities resultant from soaring life expectancy.

However, addressing the final day of the National Association of Pension Funds conference in Edinburgh, Servison said auto-enrolling workers into funds with a range of added features would bring the benefits of DC plans more in line with final salary schemes.

People should be auto-enrolled into lifecycle funds -- balanced funds designed to become more conservative as the investor approaches retirement by moving out of equities and into fixed income investments -- with set target retirement dates for each member, unless they specifically opt out.

Auto-enrolment is a hot topic of debate in the UK, as the government prepares to introduce an auto-enrolment pension scheme to boost the number of people saving for retirement.