Pensions are firmly in the spotlight at the moment. In recent weeks we’ve had series of major policy announcements that have set a clear direction of travel on the investment aspect of the system and a drive for fewer, larger schemes. The broader question of how we ensure people have enough to live on in retirement and receive the help they need requires further focus and the IFS paper, alongside the expected adequacy review from the government, will move this conversation on.
“The report correctly identifies widespread under-saving and gaps in pension provision. We are supportive of their conclusion that there is not a one size fits all solution to these problems but there is a need to be more inclusive, particularly for the self-employed, as well as for younger workers who are not yet included. The risk of over saving for those on low incomes is significant but so too is the need for most of those on average or higher earnings to save more. Striking the right balance will be a key challenge of the adequacy review, and any change would need to be carefully considered and in consultation, especially with employers.
“With the state pension accounting for a significant proportion of all welfare spending, the report highlights the risk that the state pension age could be pushed back further to maintain affordability. We agree that there are issues here and people’s ability to keep working haven’t necessarily kept pace with increases in state pension age, as evidenced by the rise in poverty levels among those in their early 60s.
“The report recognises that many aspects of the pension system design are moving in the right direction, with plans afoot to help consolidate small pension pots and reduce the complexity of decisions people face at retirement in particular. We see the need for a joined up approach between Targeted Support and default retirement income options as particularly important, as together they have the potential to reduce the anxiety that many people experience around making the wrong decision at the point of retirement. Targeted Support will also give individuals support in recognising that they might not be saving enough.
“The discussion on how default retirement income solutions will be designed is just getting going but we agree that these need to meet people’s twin need for a degree of income certainty and flexibility. This also recognises that decisions when not supported can sometimes have life-changing implications. We look forward to a long-awaited review of retirement provision, aligning with ensuring decisions in saving and spending provide support and guidance for both secure and better retirements through an integrated public and private retirement system.”
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