The Association of Consulting Actuaries (ACA) has called on all political parties to focus on a “narrow, achievable and deliverable” list of priorities to ensure today’s working generations build adequate levels of pension saving.
Speaking after the launch of the ACA’s Pensions and Savings manifesto, chair Steven Taylor said there should also be stability in long-term pensions policy “so that savers, employers and scheme managers have greater certainty in developing and implementing sensible long-term plans”.
The manifesto calls for the following policy initiatives to be considered by each party:
Commit to completing current reforms where there has been a broad cross-party consensus, including launching Pension Dashboards to savers and completing Value for Money initiatives that are practical to implement.
Give a fresh boost to auto-enrolment (AE), including increasing minimum AE contribution rates and further widening coverage. The ACA believes that AE also needs to be adapted to include the self-employed and those engaged in the ‘gig economy’.
Introduce flexible “sidecar” savings ahead of AE step-ups, to encourage a much-needed increase in voluntary savings above AE limits. To mitigate cost-of-living constraints, the ACA recommends that savers are given greater flexibility to access their own sidecar contributions for resilience needs.
Introduce a default CDC provider for individual decumulation. The ACA believes CDC pension arrangements have the potential to significantly improve retirement outcomes by harnessing the benefits of collectivisation for a new generation of savers.
Avoid knee-jerk changes to the pensions tax regime. The ACA recommends that next government should identify an overall framework that can flex to accommodate the needs of the day, upon which the political parties might agree a consensus.
Promote state-pension sustainability with replacement of the ‘triple lock’. The ACA suggests the triple-lock should be retained only until 2026 while a full review of the appropriate level is carried out and, if necessary, revised upwards.
From 2026, it recommends the state pension is increased in line with earnings, with a five-yearly review that could reflect other factors such as general inflation over the period.
Implement a better social care regime. The ACA believes that a longer-term approach requires a range of solutions to suit different age groups and suggests a further review of the Dilnott findings so as to outline a comprehensive social-care package.
Taylor concluded: “The ACA believes that helping today’s working generations build adequate levels of pension saving is a defining challenge of our time. The DWP’s own research published last year suggests roughly two out of every five working-age people are undersaving for retirement – equivalent to over 12.5 million individuals.
“Auto-enrolment, while a success in terms of restoring and extending coverage, will not provide the level of income most savers expect. The AE minimum will need to be either materially stepped up or combined with other measures including greater support for risk pooling arrangements such as CDC and voluntary ‘sidecars’ to deliver anything like a comfortable retirement for this and future generations.”
