UK policymakers must rethink the meaning of pension adequacy and use established solutions as benchmarks to deliver better retirement outcomes, according to Festina Finance, a European pension administration technology provider.
Festina’s UK country head Daniel McLaughlin told Pensions Expert that the Pensions Commission’s focus on adequacy was an opportunity to be more ambitious in setting a destination for reform. This should focus on adopting proven innovations from other countries that focus retirement systems on outcomes for consumers.
McLaughlin said: “If we’re serious about adequacy, the conversation needs to be bigger than whether 12% contributions are enough. We need to stop tweaking and start transforming.”
“Adequacy in the UK needs a structural reset, and not just another percentage point.”
Daniel McLaughlin, Festina Finance
Encouraged by the long-term scope of the Pensions Commission, McLaughlin said the UK must look to successes in other markets, where contribution rates exceed 20% and coverage is typically above 90%. Citing data from Mercer’s Global Pension Index, he said these markets also achieved replacement rates of 70% to 85% of wages for average earners and up to 100% for the lower paid.
“These outcomes haven’t happened by chance,” said McLaughlin. “They’re the result of intentional design: strong policy frameworks, a strong digital infrastructure, collective agreements and, crucially, a shared national commitment to adequate retirement income. These systems don’t just enrol people; they ensure outcomes are meaningful.”
The UK needs to adjust its mindset away from building pots to generating income, he continued, which is the default approach in some European systems. This “subtle shift” would deliver better decision-making throughout the retirement journey.
Some of this shift has already happened, McLaughlin told Pensions Expert. Greater understanding – and adoption – of technology has raised expectations. The market is more data-driven, making it more competitive. Regulators have anticipated the change and are adapting their supervision for a more sophisticated system – as demonstrated by recent strategy shifts at the Pensions Regulator and the Financial Conduct Authority.
McLaughlin added: “The UK has a proud record of pioneering auto-enrolment. Now we need to raise the bar. We must redefine what adequacy really means, design with outcomes in mind, and build a system that delivers a dignified retirement outcome, not just savings, for all.
“Adequacy in the UK needs a structural reset, and not just another percentage point.”
