Industry view – Pensions and Lifetime Savings Association


Nigel Peaple is director of policy and advo- cacy at the Pensions and Lifetime Savings Association (PLSA)


ADDRESSING PENSION ADEQUACY WITH SAVERS UNDER SUBSTANTIAL FINANCIAL PRESSURE


It’s been 10 years since the launch of auto- matic enrolment and, as a result, millions more people are now saving into a work- place pension. However, opportunities to improve the retirement savings system remain. A sur- vey we conducted at the Pensions and Lifetime Savings Association (PLSA) shows around a quarter (26%) of savers in workplace pensions think their current level of saving will not be enough to get by on when they retire. It’s a worrying statistic. But the PLSA – alongside our colleagues in Whitehall and the wider pensions industry – are looking at ways we can help address the balance. Since automatic enrolment’s introduc- tion, the PLSA has been building a case for a pensions framework that can help everyone achieve an adequate income in retirement. This work includes research and policy projects such as: the Pension Quality Mark; our Retirement Living Standards, our 2018 policy paper Hitting


the Target: A Vision for Retirement Income Adequacy; and Guided Retirement Income Choices, our proposals to address poor outcomes when savers make decisions about how to access their pensions. But with UK households under financial pressure from the ongoing cost-of-living crisis and two years of Covid-19 restric- tions, savers are concerned for their financial wellbeing when they stop working. We heard that those aged between 35 and 54 (29%) are the most concerned, com- pared to those aged over 55 (20%). And while just one in five (20%) of those in households with an income of more than £48k have concerns, that figure rises to 35% of those in low-income households – whose total income is up to £14k – and 31% with an income between £14k and £28k. It’s a worrying prospect and is why the pensions industry must continue to make the case to government to address this issue if we want savers to achieve a better income in retirement. It’s why in 2019 we launched our Retire- ment Living Standards – which show savers what life in retirement looks like at three different levels – and updated them during 2021 to reflect trends in spending brought about by lockdown living. The current standards suggest that, roughly speaking, a single person will need about £11k a year to achieve the min- imum living standard, £21k for moderate and £34k to be comfortable. For couples, it’s £17k, £31k and £50k, respectively. With that in mind, our survey reported that one in five people (21%) who have a pension say they save into it to ensure


they have a minimum standard of living in retirement; a pension that meets all their basic needs.


Around two in five (41%), however, save to ensure they have a moderate standard of living in retirement – a pension that will meet their basic needs and allow them to do some of the things that they would like to do – while a third (33%) do so to ensure they have a comfortable living standard. So how do we enable savers to achieve the standard of living they say they want from their pensions? One area that we have long argued is that current contribution levels are unlikely to give people the level of retirement income they expect or need. As the government seeks to ‘level-up’ the economy, narrow- ing wealth disparities between regions and different demographics, we think now is the right time for the government to commit to levelling up pensions, grad- ually, during the next decade. It’s our view that, by 2030, pension con- tributions would be a 10% contribution, split evenly between employers and employees – with the employers asked to pay 2% more than now and employees not asked to make any additional contri- butions. Then, in the early 2030s, when affordable, employers and workers would each be asked to pay in an extra 1%, so bringing the total contribution up to 12%. We recognise the current substantial financial pressures people face, so we are not proposing any changes to automatic enrolment for some years. However, we must at least make firm plans now to raise contributions in the future, so that people do not also face financial hardship come retirement.


Publisher portfolio Verlag Office 5.08 – 5th floor Fleet House 8 –12 New Bridge Street London EC4V 6AL +44 (0)20 7822 8522 london@portfolio-verlag.com


Editor Mark Dunne m.dunne@portfolio-institutional.co.uk


Deputy editor Mona Dohle


m.dohle@portfolio-institutional.co.uk


Senior writer Andrew Holt


a.holt@portfolio-institutional.co.uk 10 | portfolio institutional | May 2022 | issue 113


Publisher John Waterson


j.waterson@portfolio-institutional.co.uk


Head of sales Clarissa Huber


c.huber@portfolio-institutional.co.uk


Business development manager Basit Mohammed


b.mohammed@portfolio-institutional.co.uk


Head of roundtables Mary Brocklebank m.brocklebank@portfolio-institutional.co.uk


Marketing executive Hannah Carry


h.carry@portfolio-institutional.co.uk


CRM manager and business development Silvia Silvestri


s.silvestri@portfolio-institutional.co.uk


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60