PLSA launches consultation to improve UK’s retirement

• National Retirement Income Targets Proposed
• Changes to Contributions, Automatic Enrolment Scope and Working Longer Suggested 

With 78% of people aged 18 to 64 years old saying they were not sure or did not know where to look to tell if they were on track with their retirement savings, the Pensions and Lifetime Savings Association (PLSA) has launched a major new consultation (Hitting the Target) designed to help people define and meet their retirement goals. 

Hitting the Target – Delivering Better Retirement Outcomes seeks to consult on the development of a set of new national retirement income targets and to look at what changes to the current retirement saving system would make this possible. The PLSA will also be engaging with Government as part of the process. 

Identifying how much you need to save for retirement is a significant challenge for most people with only 16% saying they know much they would need to achieve the standard of living they hope for in retirement. Just under half (43%) of those who said they knew how much they need to save said they had come to this conclusion by themselves demonstrating that a more evidence based national model is needed. 

National Retirement Income Targets:

National Retirement Income Targets (RITs) – which are currently used successfully in Australia – provide savers with tangible income goals which take into account what they need to save in order to achieve different standards of living in retirement (minimum, modest and comfortable).  

This will address one of the key challenges facing savers as there is currently no widely accepted and generally understood target for retirement income and more than three quarters (77%) of people admit that they do not know how much they need in later life. Four out of five people (80%) said that a national retirement income target would help them plan for retirement. 

As part of the consultation further in-depth analysis will be undertaken to determine exact income levels and the PLSA welcomes views from interested parties. However, as part of this initial research, consumers were asked for their views and those between 55 and 64 years old – who are arguably most likely to be knowledgeable - suggested that for a single person they might be minimum (£10,000 to less than £15,000), modest (£15,000 - £25,000) and comfortable (more than £25,000). 

Graham Vidler, Director of External Affairs at the Pensions and Lifetime Savings Association, said:

“We all know we need to save for retirement but few of us know how much we might need to live on or whether we are on track to hit that target. The PLSA will be consulting widely to understand how the industry and Government can help people build and reach a retirement plan. 

“As part of this, we are asking difficult questions which need to be answered to help more people make the right choices around retirement. We are also looking to develop a new set of Retirement Income Targets that will empower savers by providing tangible targets for them to achieve.  We look forward to working closely with stakeholders to build a retirement savings market which is truly focused on the end users – savers.” 

Helping to Hit the Target:

Whatever level targets are set at, savers will need help reaching them. As part of the consultation, the PLSA will be looking at the following areas to help them do so: 

• How can we bring more people into the scope of automatic enrolment (AE) and spread the benefits of a successful implementation?
• Should the current system of tax relief be modified to support savers in achieving the new retirement income targets?
• How can we gradually increase the level of minimum contributions into AE – beyond those already planned - without discouraging people from saving?
• Can we do more to help people turn their property wealth into retirement income? Can pension schemes play a role in helping unlock the supply of housing which people need?
• How can we support realistic extensions to working lives?
• How can we ensure that people get what they want when they turn their pension savings into income?  What are the respective roles of defaults and engaged decision-making?
• How can we let people know about their money in ways and at times which make sense to them?  How do we improve engagement by using simple standardised messages?

 Graham Vidler, Director of External Affairs at the Pensions and Lifetime Savings Association, said:

“Savers will need support as they work to achieve the Retirement Income Targets and we need to consider what might need to change within the UK retirement and savings market to facilitate these steps forward. Our report sets out some of the changes we think are necessary but we want everyone with an interest in the nation’s retirement future to respond - challenging, improving and building on our proposals.” 

-Ends- 

METHODOLOGY:

The PLSA commissioned Populus Data Solutions to undertake an omnibus poll of approximately 1,600 individuals aged 18 to State Pension Age (SPA) in the UK to examine attitudes towards saving for retirement. The poll was conducted between 4 and 5 September 2017. Data has been weighted to be representative of the UK population. 

NOTES TO EDITORS:

PRESS CONTACTS

Lee Blackwell, Head of Media & PR, Pensions and Lifetime Savings Association

T: 020 7601 1726, M: 07713 073 023, E: [email protected]

Kathryn Mortimer, Press Officer, Pensions and Lifetime Savings Association

T: 020 7601 1748, M: 07901 007713, E: [email protected]

Eleanor Carric, PR Manager, Pensions and Lifetime Savings Association

T: 020 7601 1718, M: 07825 171 446, E: [email protected] 

ABOUT THE PENSIONS AND LIFETIME SAVINGS ASSOCIATION:

We’re the Pensions and Lifetime Savings Association; the national association with a ninety year history of helping pension professionals run better pension schemes. Our members include over 1,300 pension schemes with 20 million members and £1 trillion in assets, and over 400 businesses. They make us the voice for pensions and lifetime savings in Westminster, Whitehall and Brussels.  

Our purpose is simple: to help everyone to achieve a better income in retirement. We work to get more money into retirement savings, to get more value out of those savings and to build the confidence and understanding of savers.