Can targets solve the pension saving crisis?
18 Jun 2019
“Can targets solve the pension saving crisis?”
This was the question I posed to panellists (and to the audience) in the session I hosted at our recent DC Conference. Joined by Richard Butcher (PLSA), Laura Miller (The Daily Telegraph) and Dianne Day (ITS), we explored the impact that introducing ‘pounds and pence’ targets could have on pension saving in the UK.
For those of you who may not be aware, The Pensions and Lifetime Savings Association (PLSA) has been working with Loughborough University to determine retirement targets for defined contributions pensions savers to aim towards, in the hope that this will encourage saving. The idea comes from Australia where a basket of goods approach has been taken, with a flat income target against each level - from basic, to modest, to comfortable. We won’t know the final recommended targets until later this year, but while we wait for these recommendations, we were keen to discuss what the industry thinks.
When we asked our panel what they thought, the overall reaction was positive. We all agreed that targets can change saving behaviours as they give savers much needed context, in that targets provide relatable, real life goals that savers can work to achieve.
Our audience agreed, with 85% answering yes to a poll which asked whether they thought the targets will have a positive impact on retirement saving levels.
However, our panel noted that managing the subjectivity and communication challenge around how targets are labelled is an area that requires careful thought. We also agreed that there will be a big challenge in how best to promote the new targets when they are launched and that for them to be a success, the whole pension industry will need to get behind them to help to build confidence in the targets.
Our next question asked our audience how long they think it will take for the targets to become an industry standard. The results demonstrated pragmatism amongst respondents with over half (53%) answering with five years, 24% 3 years and 0% 1 year. Interestingly, almost a quarter (23%) answered never, demonstrating the importance of securing industry support early on.
Overall, the session showed that broadly, there is a big appetite for this new approach to encouraging increased retirement saving, and if done well, the impact could make a real difference to current levels of saving in the UK. However, how the targets are communicated and whether the pension industry is willing to get behind the targets will be what makes or breaks the initiative. What is clear is that it is an ambitious project, that has the potential to solve, or at least vastly improve the current pension saving crisis. I, along with many others I’m sure, look forward to seeing the final targets when they are revealed later this year!