The Commission has submitted its response to the Work and Pensions Select Committee’s inquiry into ‘Protecting Pension Savers: Saving for Later Life’. The Commission exposes, for the first time, the wide disparities in the financial position different groups of people will find themselves in when they reach retirement. Most people expect the same – positive – outcome from very different inputs. Many will be disappointed. At the crux of the issue: many peoples’ expectations of their post-retirement lifestyle are rising, while their likely outcomes are falling.
Whilst we believe that the age limits and minimum earnings levels for automatic enrolment should be reduced, as they deprive many low paid employees of an employer’s contribution, we think it unlikely that an increase in total ‘automatic’ contributions, to bring likely outcomes in line with expectations, will be possible in the next 5 years. So, unless something is done to get people more connected, many are ‘sleepwalking’ into a much worse situation than they expect. It’s not just the new generation of people automatically enrolled. Many people who could get higher ‘employer matched’ contributions do not take them up – often giving up the chance to get £3 of value for £1 of contributions.
As part of our constructive and research-based response, the Commission suggested two solutions to this pensions time-bomb facing the UK. First, a major campaign effort is needed to change the nation’s retirement saving attitude, which remains largely as it was in the 20th century. A properly costed and powerful campaign to create a lightbulb ‘moment’ aimed at the 30 million Britons in work, will help those currently sleepwalking into tough financial situations in later life to understand where they stand and what can be done to improve their likely retirement outcomes. Second, a fresh review, similar to that carried out to such effect by the Pensions Commission, is needed to achieve a consensus on the situation. The last comprehensive analysis from the Pensions Commission is quickly reaching 20 years old. A new review is recommended to prevent the nationwide sliding – incomprehensively – into inadequate pension saving.
The Commission welcomes any opportunities to work and collaborate further on the subject with the Committee and other stakeholders.
You can find our full response here.