Commenting on the Pensions and Lifetime Savings Association (PLSA) report – Hitting the Target: A Vision for Retirement Income Adequacy, Troy Clutterbuck, CEO of NOW: Pensions said: “Knowing how much you need to set aside for your retirement is far from simple. By the time most people ask themselves whether they’ve saved enough, it’s too late to do that much about it.
“Communicated in the right way, Retirement Income Targets could help millions of savers to better understand their retirement savings and the steps they can take to safeguard their future. But, to really succeed, the government, pension providers and consumer groups all need to lend their support.
“Integrating Retirement Income Targets into the Pensions Dashboard would be a natural fit, giving savers a simple indication of whether they are on track with their saving. But, giving a warning should be just one part of the equation. To be effective, it’s important that savers have the right information to take action.”
Increasing and rebalancing contributions
One of the recommendations in the report is to increase minimum contribution levels from 8% of qualifying earnings to 12% of total earnings between 2025 and 2030 with at least 50% of this coming from employers.
A study carried out by the Pensions Policy Institute commissioned by NOW: Pensions revealed that UK employers are bearing less of the pensions burden than other countries that have nationwide automatic enrolment schemes or nationwide DC schemes.
The study, which examined pension provision in Italy, New Zealand, Japan and Denmark revealed that in the UK, employers making auto enrolment minimum contributions will be bearing 37.5% of the contribution burden. This compares to 84.8% in Italy, 66.7% in Denmark and at least 50% in Japan. The only country which is less generous, is New Zealand where some employers bear only 27% of the burden.
Troy Clutterbuck continued: “As auto enrolment minimum contributions increase, employees will find themselves bearing more of the burden than their employer and this inequality doesn’t feel right.
“The employer contribution is the main selling point for workplace pensions and over the long term, rebalancing contributions would almost certainly help minimise opt outs.”