There is a quiet revolution going on in how we plan for retirement as, in general, we are living longer, healthier lives. I am determined to make sure that the pension system is ready for the challenges that will come with these changes.
The current pension system is working well and there is already much to celebrate. Automatic enrolment has successfully reversed a decade of declining savings. In April the ONS reported that the percentage of employees who are part of a workplace pension scheme had reached a record high of 73 per cent. This is very encouraging and highlights the success of this policy, which has seen more than 9.6 million people enrolled in a workplace pension since auto-enrolment kicked off in October 2012.
It has also helped to get young people into the habit of saving, with almost seven in 10 eligible 22 to 29 year olds working in the private sector now enrolled in a workplace pension. This is a heartening statistic as we are looking to create a new generation of savers.
It is also positive to hear that pensioner incomes are at historically high levels. Statistics published this year show that pensioner incomes have reached their highest average levels since records began, even after taking inflation into account.
This is great news and demonstrates that measures taken in the past, such as the introduction of pension credit and the triple lock uprating of state pensions, have helped to raise people’s standards of living in retirement.
These numbers show us a pension landscape that is working well for current pensioners and is building a new generation of savers who can look forward with confidence towards their later life.
This is a great position to be in, but there is more to do. I know that in the future, people will face different challenges as they plan their retirement.
A recent report published by the Pension Policy Institute predicted that the number of savers entering retirement with only defined contribution pension pots will increase over the coming decades. They will also reach their State Pension age later, reflecting increases in life expectancy.
The pension freedoms mean that these people will enjoy greater choice and flexibility so that they can use their hard-earned savings as they see fit. However, they will also have important decisions to make.
It’s vital they can access support when they approach retirement that gives them the information to make the best decisions for themselves and their families.
Pension Wise has organised over a quarter of a million appointments in three years and provides an excellent service, with 97 per cent of users saying they would recommend it. That is a fantastic rating for any government service, but we are not going to rely on word of mouth alone.
To build on this success and make sure that people looking for guidance on their pension options can access all the information they need in one place we are creating the Single Financial Guidance Body, which will replace Pension Wise, the Pension Advisory Service and the Money Advice Service.
With record levels of saving into a workplace pension and historically high levels of income for pensioners this year, the UK’s pension system is working well.
The challenge we are tackling now is making sure future retirees have access to the support they need as they look forward to a secure and comfortable retirement of their own.