The following comments are for use after the embargo has expired at 00:01 on 5th July.
The study reveals 80% of people aren’t sure if they are saving enough for retirement, while over half (51%) believe the automatic enrolment minimum contribution – set to rise to a total of 8% of band earnings next year – is the Government’s ‘recommended amount’.
The report recommends a number of reforms designed to boost pensions adequacy, including:
Introducing ‘retirement income targets’ that show the lifestyle people could afford on different levels of income as part of a renewed focus on improving engagement
Increasing minimum contributions under automatic enrolment from 8% of band earnings to 12% of total salary by 2030
Requiring pension schemes to signpost to ‘appropriate product options’ at retirement
Making it easier for people to use other income sources, such as housing equity, to supplement their retirement income
Improving governance with a clear focus on ensuring pension schemes offer value for money
Tom Selby, senior analyst at AJ Bell, comments:
“Improving engagement and understanding is absolutely essential if we are to build on the success of automatic enrolment and get people saving more for retirement.
“The fact half of savers believe the auto-enrolment minimum is the Government’s ‘recommended amount’ is worrying as for most people this will fail to deliver a decent level of retirement income.
“Without action from Government, regulators and the wider industry there is a real risk millions of people will sleepwalk into a retirement disaster.
“This report represents an important milestone in the debate on boosting pensions adequacy in the UK, bringing together most of the major retirement issues confronting policymakers.
“The idea of setting retirement income targets could help jolt those who are not saving enough into action. With the Government already investigating creating a mid-life MOT to help savers navigate their retirement options and the FCA recently setting out improvements to the way people receive information about their pensions, it feels like a long overdue drive to boost engagement is beginning to gather momentum.
“While it is clear we need to get people to save more for retirement, hiking auto-enrolment contributions without first ensuring savers understand the value of retirement saving would risk a spike in opt-outs.”