Response to the ONS Occupational Pension statistics
20 Jun 2019
Commenting on the ONS occupational pension figures released today, Michael Ambery, Senior DC Consultant and Head of Provider Relations at Hymans Robertson, says:
“It is great to see that auto enrolment is continuing to encourage more employers to help more people save for their retirement, but the job is far from done. In reality, with more employers providing AE pensions, many savers will be believing that the pension contributions they are making will provide them with a comfortable income in retirement. Instead, they will be surprised to find at the point of retirement, that they simply haven’t saved enough. Our next challenge must be to ensure and encourage people to increase their savings to meaningful levels that will provide them with an adequate income at retirement. We support the PLSA’s focus for providing clear and simple targets and inspiring people to increase their contributions with knowledge of these targets and their needs in retirement. Our own experience shows that targets and clear communication to be vital if employees are to reach savings levels that will provide them with adequate retirement incomes.
“Even with the recent increases in contribution levels to 8% the truth is that many people will be massively under-saving for a comfortable retirement. The reduction of the AE starting age to 18 and changing the entry threshold to base contributions which are due to be implemented, will help. These moves alone, however, will not achieve enough and other measures, such as pushing out the target retirement date to coincide with their State Pension Age and further increasing contributions to a total of 12%, will be needed to achieve an adequate income in retirement. At 12% we would begin to see a contribution that will have a meaningful impact for employees’ retirement savings. At that level we can see far greater certainty of them reaching a target income that they can live on in retirement.
“Employers, the industry and Government must focus on helping people to save enough for retirement and not presume that the AE default rates mean everything is going to be rosy when they finish working. Collectively we have the tools, we need to use them."