The Pensions Minister, Torsten Bell, has confirmed that the Government will review pension adequacy “in due course,” following ongoing calls from industry experts, including the Society of Pension Professionals (SPP), for a comprehensive assessment.
This comes after the government decided last year to delay the second stage of their planned pensions review, which was supposed to look at how much money UK workers were saving for retirement. According to recent data from the Department for Work & Pensions (DWP), 12.5 million people, or more than one-third of working adults, are currently undersaving.
In response to a Parliamentary Question, Bell acknowledged AE’s success in boosting pension participation but emphasised the necessity of additional measures to guarantee retirement security. Steps to increase pension adequacy will be examined in the upcoming review phase.
He says: “Automatic Enrolment (AE) has succeeded in transforming retirement saving with over 11 million employees having been automatically enrolled into a workplace pension since 2012. However, we know we need to do even more to build on the success of AE in getting people in to saving by ensuring security in retirement for all…We also acknowledge the importance of addressing the broader question of adequacy and how to build on the success of AE to ensure that people are saving enough for retirement. Therefore, the second phase of the review will in due course look at further steps to improve pension outcomes, and pension adequacy for all.”
SPP president Sophia Singleton welcomed the focus on adequacy but highlighted the need to define what constitutes a suitable pension. She advocates for a more ‘dynamic solution’ that goes beyond ‘a simple minimum flat contribution rate’.
Singleton says: “Automatic enrolment has been hugely successful in getting many more people to save but not so successful in getting them to save enough. However, rather than simply looking at a compulsory increase in contributions, we need to define adequacy, recognise that one size does not necessarily fit all and that we may need a more dynamic solution than a simple minimum flat contribution rate. There are various other actions that policymakers, industry and savers can take, from supporting an older workforce and helping disenfranchised groups to improving trust and engagement.
“A thorough Pensions Adequacy Review from the Government, that industry and numerous representative groups can feed into, would be a useful starting point to consider all of this, which is why the SPP has been calling for such a review to take place sooner rather than later.”
