• Workplace pensions invest £2 trillion in the UK economy and provide a vital income for millions of people
• Next Government must target increased contributions, effective saver engagement with pensions, improved scheme governance and more options for consolidation
• Pensions must not be allowed to become a back burner issue
The Pensions and Lifetime Savings Association (PLSA) challenges the next Government to do everything it can to help everyone reach a better income in retirement.
In a policy manifesto for the up-coming election, the PLSA said workplace pensions are vital part of the UK economy, providing an essential retirement income for millions of workers and driving growth by investing £2 trillion in the UK economy.
Today more people are saving into workplace pensions and they have more freedom over how to use their savings than ever before. But the future remains uncertain as people don’t know how much to save and many defined benefit schemes and their employers face funding challenges.
The PLSA proposes four ways to promote better retirement outcomes for millions of UK savers:
1) Adequate contributions: Increase automatic enrolment contributions – The next Government must build on the success of automatic enrolment and increase contributions to 12% of salary by 2030 (split 50-50 between employer and employee) – following the lead of the PLSA’s Pension Quality Mark. It should also implement current Government policy to remove the Lower Earnings Limit for automatic enrolment as soon as possible and ensure any solution to tackle social care funding should not be at the expense of existing and extra pension savings.
2) Effective engagement: Ensure Pensions Dashboard helps people set and achieve goals – Savers’ engagement with their retirement savings is too low. The next Government should support the development of the Pensions Dashboard, ensuring the first one is non-commercial, has access to data, and protects consumer information. The Dashboard must also include the State Pension so people can fully understand their retirement income as well as the PLSA’s new Retirement Living Standards to help people understand the lifestyle their savings could buy them.
3) Well-run schemes: Put in place the right funding regime for defined benefit schemes, backed with appropriate powers for the regulator to prevent reckless behaviour – While most pension schemes are well-run and managed, high-profile cases like Carillion and BHS damage confidence in the pensions system. The Government’s 2018 Defined Benefit White Paper proposed changes that will help make DB pensions more sustainable. The next Government should legislate quickly to give the Pensions Regulator new powers to take action sooner, impose appropriate fines, and have more oversight of risk corporate transactions in order to prevent reckless behaviour and protect savers’ hard-earned money. The Pensions Regulator should also press ahead with its plans for a new code for defined benefit schemes so it can set clear standards on pensions funding.
4) Pensions and Scale: Facilitate new large-scale schemes to protect savers and help employers – 11 million people in the private sector schemes rely on the benefits from defined benefit pension schemes for a secure pension in retirement. However, despite employer contributions of £400 billion over the last decade, 3,500 DB schemes have a combined £188 billion deficit and 3 million people in have just a 50/50 chance receiving their benefits in full. The next Government should take forward the proposals from its 2018 White Paper to strengthen protection for savers by allowing consolidation and the creation of Superfunds to protect member benefits and create an incentive and achievable goal for employers to accelerate funding into schemes. It should also enable DB Schemes to enter into a superfund at a lower cost than insurance buyout, giving employers greater flexibility while also protecting savers.
Nigel Peaple, Director of Policy & Research, PLSA, said: “The Pension Schemes Bill must be reintroduced as soon as practicably possible. After that, and with the retirements of millions of people hanging in the balance, the next Government cannot allow pensions to become a back-burner issue.
“Ensuring adequate contributions, fostering effective engagement and allowing well-run schemes to operate at appropriate scale provides the blueprint for making the greatest difference to the greatest number of savers. Together with the pensions industry, the Government must seize this enormous opportunity to help more people achieve a better income in retirement.”
Click here to read the PLSA Manifesto in full.
Mark Smith, Senior PR Manager
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Steven Kennedy, PR Manager
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