PLSA calls for further reform as state pension sees record rise

From next week, basic and new State Pension payments will increase by 10.1%, boosting the retirement incomes of more than 10 million retirees across the UK.

The State Pension is going up from £185.15 per week (£9,628 per year) to £203.85 per week (£10,600 per year). Although the new total amount will help to support the most under-pensioned groups, it is not enough to meet the PLSA’s Minimum Retirement Living Standard (£12,800 for a single person). Covering all basic needs – and a little extra for social and cultural participation – this is the amount the Centre for Research in Social Research at Loughborough University says is needed for an acceptable standard of living based on extensive interviews with members of the public in all regions of the UK.

Nigel Peaple, Director of Policy & Advocacy, PLSA said: “Making up the majority of most pensioners’ income, the State Pension is a vital pillar in guarding against poverty in retirement. The Government was right to maintain the triple lock in the face of heightened inflation. In time, the State Pension should be reformed so that it is set at a sufficient level to protect everyone – especially under-pensioned groups – from poverty.

“Alongside further State Pension reform, the PLSA is calling for a timeline to set out a gradual rise in automatic enrolment contributions, over the next decade, so that by the early 2030s, they will increase from 8% to 12%, and contributions are split evenly between employers and employees. We also want to see the scope of the system expanded to improve savings amongst those not already included. A bill has already been laid to allow a younger cohort (18-22) to qualify for AE and begin from the first pound of earnings, however, the biggest lever Government can pull to meaningfully improve the retirement outcomes of millions of savers, is to set a timeline for increasing the minimum pension contributions paid into a worker’s pension by employers.”

FIVE STEPS TO BETTER PENSIONS

• 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 to ensure that no pensioner is in 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.

Read the PLSA’s full recommendations for reform in its flagship policy paper, ‘Five Steps to Better Pensions: Time for a New Consensus.’

Mark Smith, Head of Media Relations
020 7601 1726 | [email protected]

Cali Sullivan, PR Manager
020 7601 1761 | [email protected]