There are further calls for an independent pensions commission to be put in place to tackle the substantial challenge of insufficient incomes in retirement.
A report by the International Longevity Centre-UK, and sponsored by Prudential, has called for political consensus to tackle “perfect storm” for savers.
Unveiling the report, Ben Franklin, senior research fellow at ILC-UK, said a new pensions commission was urgently needed in order to look at the problem of retirement income adequacy in a holistic way – taking into account the political and economic realities of our time.
He said: “The core goal of ensuring adequate retirement incomes based on the principle of consensus based policy making, is consistent with the original thrust of the Turner Commission a decade ago, and can be at the heart of a new coherent settlement on pensions policy in the UK.”
The report said that despite a number of positive policy initiatives, many future savers are still unlikely to secure adequate retirement incomes as a consequence of economic and demographic headwinds.
According to the report, the UK’s economic recovery is founded on soaring household spending, but in the absence of increasing incomes, savings will fall and indebtedness will rise.
The demographic storm is on average, in 2012, women left the workforce at 63, which means they will need to fund 26 years in retirement. Men will need to fund 21 years.
The report argued that a commission be set up as soon as possible after the general election to help navigate the tricky road ahead, but that “in order to allow the current set of reforms to bed-in and to ensure at least short to medium term stability in pensions policy, the commission should not set out any final proposals until 2017 at the earliest”.
The report also argues that the commission must “carry sufficient weight politically to ensure that its findings and proposals are taken seriously” and recommended that the commission should report to the secretary of state for work and pensions, the chancellor and prime minister.
Tim Fassam, head of public affairs at Prudential, said: “Recent changes have expanded the number of people saving and provided a wider range of choices in retirement.
“While these are important improvements, most people are still not saving enough to provide the retirement they desire. Pension decisions are long-term, so stability and predictability are important in encouraging people to save more.
“At Prudential we believe the best way to achieve this is through consensus with savers, policymakers and industry working together.”
Last year, Royal London also called for a new independent commission to set the direction of policy on pensions, retirement income and later life financial provision, amid concerns that short-term government thinking could see some of the radical pensions freedom unwound.
Echoing the National Association of Pension Funds’ proposal for an Independent Retirement Savings Commission, the insurer said the committee should consider the full range of issues facing the growing elderly population of the UK.
emma.hughes@ft.com
