Trade body Pensions UK plans to feed into the new Pensions Commission with its own research on building flexibility into the automatic enrolment system.
Julian Mund, chief executive of Pensions UK – previously the PLSA – voiced support for the government’s “ambition” on retirement income adequacy, following the announcement of the revival of the Pensions Commission this morning (21 July).
“There is a significant job to finish,” Mund said. “Higher pension contributions must become the norm, with more people brought into saving, and a state pension that always protects against poverty.”
The trade body’s research has shown that one in five working households is likely to fall short of the income needed to meet the minimum standard of living in retirement, as defined by Pensions UK’s Retirement Living Standards models.
“We are currently undertaking research to explore how building more flexibility into the automatic enrolment system might deliver better outcomes overall, as an input to this work,” Mund continued.
“Pensions UK has a clear purpose: to help everyone achieve a better income in retirement. We are optimistic the commission will make real strides towards delivering a pension system that is adequate, affordable and fair, and stand ready to lend our expertise to the review panel as they tackle these vital issues.”
Reforms must protect low earners, IFS cautions
The Pensions Regulator (TPR) also gave its support to the commission, with chief executive Nausicaa Delfas saying: “Thanks to automatic enrolment over 11 million more people now save into a pension, and we are determined to make sure each and every one of those workers receive value for their money.
“But many people are heading for an insecure retirement. That is why we look forward to continuing to support government in its mission to address adequacy and encourage industry to engage with the Pensions Commission to make the pension system work for everyone.”
“Any reforms to boost pension saving must be carefully targeted to minimise falls in take-home pay among those who can least afford them.”
Laurence O’Brien, Institute for Fiscal Studies
The Institute for Fiscal Studies (IFS) recently published the final report of its own pension system review, which contained several recommendations for changes. These included measures to support low earners and the self-employed – two key areas that the Pensions Commission has been tasked with examining.
Laurence O’Brien, a senior research economist at IFS and an author of its report, said: “Despite the success of automatic enrolment in increasing the share of employees saving in a workplace pension, our recent research has shown that, among employees saving in a defined contribution pension, almost seven million appear on course for a disappointing income when they reach retirement.
“Alongside this, only one in five self-employed workers are currently saving in a pension. In the face of these trends, the launch of a new Pensions Commission, focusing on the adequacy of retirement incomes, is welcome. However, any reforms to boost pension saving must be carefully targeted to minimise falls in take-home pay among those who can least afford them.”
