Ahead of the general election, Nigel Peaple, Director of Policy and Research at the PLSA challenges the next Government to act on four areas for pensions.
When we usually enter the last months of a year the furthest thing from our minds while we start to enjoy a mince pie or two is the prospect of a forthcoming general election.
2019, however, is anything but a normal year. So perhaps its best that we have been planning for the unexpected.
And it’s in those plans that we are challenging the next Government – whomever they may be – to be bold in their decision making for 2020 and beyond while ensuring that pension saving and engagement form a large part of future policy making.
But we don’t expect them to make those changes on their own and in true political fashion as is befitting an election process the PLSA has launched its own policy manifesto urging the new Government to do everything it can to help everyone reach a better income in retirement.
We are now in a world where more people than ever before are saving into workplace pensions and having more freedom over how to use their savings once they retire. That choice means that for many savers they simply don’t know how much they will need to put aside; although they can review our new Retirement Living Standards to give them an idea what to aim for.
Add to that, that many defined benefit schemes and their employers face funding challenges it paints a rather uncertain picture and one we urge the next Government to help smooth out to ensure millions of savers have enough out aside for later life.
We’ve broken it down to four proposals:
• 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).
• 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 – that includes the State Pensions – ensuring the first one is non-commercial, has access to data, and protects consumer information.
• 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 – 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.
• Pensions and Scale: Facilitate new large-scale schemes to protect savers and help employers – 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.
An obvious starting place for any new Government is the introduction of the Pension Schemes Bill. 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.
While pensions may always seem like a job for tomorrow, ensuring adequate contributions, fostering effective engagement and allowing well-run schemes to operate at appropriate scale must be the blueprint for making the greatest difference to the greatest number of savers. Together with the pensions industry, the Government must be bold and seize this opportunity to help more people achieve a better income in retirement.
Click here to read the PLSA Manifesto in full.