The majority of consultants and advisers attending the Corporate Adviser Summit, around 81 per cent, believe that authorised DC providers should be required to offer the ability to facilitate sidecar.
The poll followed Nest Insight executive director Will Sandbrook’s presentation where he emphasised the need to enhance financial security for low- and moderate-income households affected by income volatility, impacting about 25 million people in the UK. He explained that this demographic prioritises short-term financial management over retirement savings.
Sandbrook referenced a recent Nest Insight study which explored the financial behaviours of 50 households over a year. It revealed that while pension defaults are usually stable, they can disrupt other financial behaviours, complicating overall financial planning.
He criticised existing retirement assessment standards, pointing out that they frequently ignore the realities of living standards for those earning near the minimum wage, highlighting a monthly income threshold of around £2,000, noting that living wage figures may be overstated by about 5 per cent because they do not include pension payments.
Research also suggests that auto-enrolment has led some lower-income individuals to borrow money to fund their pension contributions, raising concerns about potential negative financial effects.
Sandbrook said: “While the default enrolment into pension plans can be beneficial, they may also lead to unintended financial consequences. Specifically, individuals already facing financial challenges might resort to borrowing to meet their pension contribution requirements, which could further complicate their financial situations.”
He advocates for increased access to emergency savings to improve long-term financial security, noting that those with these funds are more inclined to contribute to their pensions.
Sandbrook also addressed the issues that renters face and the increasing prevalence of long-term mortgages, which complicate retirement financial planning. He proposes innovative solutions that link the pension system to housing affordability, such as the idea that retirement funds may be used to develop affordable housing.
He calls for a comprehensive strategy that considers the interconnection of housing and pensions, as well as inclusive and adaptable financial planning that meets the diverse needs of households.
