The Government needs to take action to help prevent future generations of older people experiencing poor retirement living standards, warns a new report.
The Pensions Policy Institute’s (PPI) report, What is an adequate retirement income?, sponsored by The Centre for Ageing Better, says a quarter of people approaching retirement are unlikely to achieve a minimum acceptable standard of living in retirement, that fewer than one in 10 can expect to achieve a comfortable standard of living and that more than nine in 10 defined contribution savers are at high risk of not achieving their expected retirement income.
It says that while auto-enrolment has driven up contributions to pension schemes, people aged over 50 are likely to be hardest hit since they have had less time in AE schemes and because over 50s have been disproportionately at risk of redundancy and longer term unemployment in recent months.
The report examines the issues underlying debates around adequacy and the fundamental questions of what adequacy is, how it should be defined and who is responsible for providing it. It calls for a consensus on what pension adequacy means.
It says even those with defined benefit (DB) provision may find it difficult to receive adequate retirement incomes, with women, minorities, the disabled, the self-employed and carers likely to be worst hit.
Daniela Silcock, Head of Policy Research at the PPI said: “Changes in the way people work, save and retire mean
that traditional measures of adequacy are not as relevant as they used to be. A new consensus is required to
generate retirement income adequacy targets which people can use, and which allow for both income and liquid capital in retirement. Achieving a consensus will not be straightforward as it requires agreement from industry, employers and unions and the overall support of Government in order to ensure all key stakeholders play their parts.”
She added: “Our stark figures underscore the urgency to develop relevant, accessible and achievable adequacy targets for those saving today, and for future generations.”