Millions more people are saving into a workplace pension due to the successes of automatic enrolment. However, ten years after Automatic Enrolment was first introduced the PLSA has undertaken a review to find opportunities to improve the retirement savings system.
Our new research finds that without reform more than 50% of savers will fail to meet the retirement income targets set by the 2005 Pensions Commission.
We are recommending five steps for reform:
- National objectives: The creation of clear national objectives for the UK pension system - ‘adequate, affordable and fair’ objectives - combined with regular formal monitoring of whether it is on track to achieve these goals.
- State pension: Reform of the state pension so that everyone achieves the Minimum Retirement Living Standard, to prevent pensioner poverty.
- AE reform: Reform AE to get more people saving (such as younger people, multiple job holders and gig economy workers) and at higher contributions (by removing band earnings and gradually increasing contributions from 8% to 12%, split evenly between employers and employees). This is so that people on median earnings are more likely to achieve the Pensions Commission’s Target Replacement Rates.
- Under pensioned groups: Additional policy interventions to help under pensioned groups (including women, gig economy workers, self-employed people and others).
- Industry initiatives to achieve better pensions: Actions to help people engage with pensions, receive higher contributions, or get better pension outcomes.
The PLSA had already been calling on Government to increase contributions and improve savings amongst those not included in Automatic Enrolment. We have also supported proposals to reduce the qualifying age for automatic enrolment and ensure that savings should begin from the first pound of earnings.
We are seeking views from interested parties and stakeholders on our research and policy proposals. The consultation will run until 31st March 2023, and those interested in getting involved should email [email protected].