A multi-pronged approach is required to improve pensions adequacy, according to panellists at the PLSA’s annual conference in Liverpool.
Themes included expanding auto-enrolment, improving financial education, plugging the gender and ethnicity gaps, and addressing the housing crisis – which means more retirees face paying rent.
Emma Douglas, chair of the PLSA, said the association had identified five steps to improve pensions adequacy and highlighted that a quarter of UK households were not achieving the PLSA’s Retirement Living Standards.
“Without reform, 60% of the working population will fail to meet the minimum standard set by the Pensions Commission in 2005,” she said.
Sacrificing today to save for a pension tomorrow
Will Sandbrook, executive director at Nest Insight, told delegates he believed solving pension adequacy required a holistic view of the issue.
He pointed out that housing costs and social care were not included in the Retirement Living Standards calculations and that lifetime income, rather than simply retirement income, was the issue.
“How plausible is it to ask people [those on a low income] to make these sacrifices?” he said, referring to pension contributions. “How much additional income they should sacrifice today to pay for things tomorrow?”
Matt Padley, co-director of the Centre for Research in Social Policy at Loughborough University, said the idea of retirement as a distinct cut-off period was outdated, and highlighted other considerations that needed to be taken into account.
Padley said: “Divorce rates in later life are increasing and what does that mean? People were on track and then their relationship breaks down, and that can leave people in very dire financial circumstances.”
He added: “Look at the value of free transport. If that were to disappear, it would add a substantial amount of money to people’s costs.”
Chris Curry, director of the Pensions Policy Institute, said: “Adequacy is not a point in time, people might have 30 years to maintain that adequacy. We need to look at the sustainability of pensions.”
The five steps suggested by the PLSA include:
a new objective for the UK pension system to be adequate, affordable and fair;
for the state pension’s importance to be recognised;
to press ahead with extending auto-enrolment to young people and those on lower income;
to help low income groups save more; and
to offer more incentives to save via pension schemes, providers and employers.
Further reading
Taking automatic enrolment beyond pensions (9 October 2024)
IFS sets out roadmap to boosting auto-enrolment (16 September 2024)
