The pensions industry has expressed unanimous support for the new Pensions and Lifetime Savings Association (PLSA) report, hailing it as a “milestone” moment for the debate on pensions adequacy.
The report, Hitting the Target – A Vision For Retirement Income Adequacy published today, 5 July, founds that 80 per cent of people believe they are not saving enough for retirement and recommended that the government introduce targets in order to improve savers engagement, which has been praised as an “excellent start”.
Pensions Management Institute technical consultant, Tim Middleton, said: “The PLSA’s suggestion of retirement income targets as a way of focusing public attention on the need to start retirement saving from an early age is welcome.
“We are also encouraged by the suggested programme for increasing minimum contribution levels through auto-enrolment and agree that the proposed changes from the auto-enrolment review should be implemented promptly.”
The People’s Pensions head of policy, Andy Tarrent, echoed Middleton’s message: “The PLSA’s saving targets will help people to judge more accurately how much they need to save. To give people the confidence to make those extra savings, there are also reforms the industry itself can usefully undertake - and the PLSAs roadmap is an important contribution as to how the can most effectively be done.”
JLT Employee Benefits director, Nick McClelland, fundamentally agrees with the sentiment, but feels it is an opportunity for employers to go further in their contributions and suggests that education alone may not be enough.
“Employers are in a unique position of trust to help employees improve their financial wellness at each stage of the career cycle and we recently found that there are significant business benefits for employers who develop such a strategy.
“The industry also needs to recognise that simply facilitating education and guidance may not be enough, and that people’s individual personalities play a significant role in their propensity to save.”
Worryingly, the PLSA found that 51 per cent of people wrongly thought that the auto-enrolment minimum pension contribution level is the government’s recommended amount, and there is a lot of support for rising the contributions, but differing opinion on how this should be done.
AJ Bell senior analyst, Tom Selby, commented: “The fact half of savers believe the auto-enrolment minimum is the Government’s ‘recommended amount’ is worrying as for most people this will fail to deliver a decent level of retirement income.
“Without action from Government, regulators and the wider industry there is a real risk millions of people will sleepwalk into a retirement disaster.”
Hargreaves Lansdowne head of policy, Tom McPhail, agrees that contribution rates do need to rise, but suggests evidence shows this can be done without government intervention.
Selby also feels that any rises should be done with caution, as “without first ensuring savers understand the value of retirement saving would risk a spike in opt-outs”.
Furthermore, Now: Pensions CEO Troy Clutterbuck feels that setting income targets would be a “natural fit” into the pensions dashboard, but that it was important savers had the correct information.
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