Our new Retirement research paper focuses on the challenges that households face in achieving a target level of income in retirement, through the accrual of pension savings via the Automatic Enrolment framework. The report highlights several key areas which households need to factor into their saving plans and the impact that these can have on retirement outcomes
RENNY BIGGINS, RETIREMENT POLICY MANAGER AT TISA, SAID:
“WE KNOW FROM TRENDS SURROUNDING HOME OWNERSHIP AMONG YOUNGER PEOPLE THAT RENTING COULD BECOME MUCH MORE COMMON IN RETIREMENT. INDEED, RECENT STATISTICS HAVE SUGGESTED THAT UP TO A THIRD OF ‘MILLENNIALS’ WILL BE LIFETIME RENTERS, IF THINGS CONTINUE AS THEY ARE.
“CURRENT LEVELS OF CONTRIBUTION AT 8% CLEARLY WON’T CUT IT FOR THOSE HOUSEHOLDS THAT DON’T OWN THEIR HOME. BASED ON OUR RESEARCH, INCREASED CONTRIBUTIONS OF EVEN 12% WOULD BE INSUFFICIENT IN ISOLATION FOR FAMILIES UNABLE TO GET ON THE HOUSING LADDER. SHOULD RENTERS ALSO HAVE TO FACE CARE COSTS, THEY COULD QUICKLY FIND THEMSELVES IN PENSION POVERTY, WITHOUT ANY HOUSING WEALTH TO FALL BACK ON.
“THE PERENNIAL POLITICAL DEBATE AROUND THE BEST WAY TO FIX THE HOUSING CRISIS IS UNLIKELY TO BE RESOLVED ANY TIME SOON. BUT WHAT THIS REPORT DRIVES HOME IS THE CRITICAL NEED FOR CONSUMERS TO BE ARMED WITH MORE INFORMATION AND BETTER CHOICES THAT REFLECT THE NEW REALITY OF RETIREMENT.”
Households will in reality experience different life journeys before and through retirement, however the research serves as a useful reference point and outlines the magnitude of the responsibilities that individuals and households face in retirement planning.
Modelling has been undertaken using 3 contribution levels to replicate typical life journeys and indicates at which age private pension provision is used up. This provides an insight into the shortfalls that many households will face in retirement, unless changes are made to Automatic Enrolment minimum contribution levels.
Whilst we arrive at a contribution level that will enable majority of median earning households to experience a moderate level of retirement, the research also highlights where this level does not go far enough and additional levels of saving need to be considered.
Underpinning the whole report is the need for consumers to be engaged and have the knowledge to plan for their retirement from the commencement of their working lives right through and into retirement. This needs to be achieved through the creation of a comprehensive guidance framework where consumers have access to a level of guidance which is meaningful to them. Standard information is unlikely to achieve this without a degree of personalisation.
The below named organisations have contributed to this consultation response and/or were consulted in developing the proposals and recommendations in this report.
