Millions of Brits risk sleepwalking into an impoverished retirement by failing to stash away enough in their pension pots, the UK’s biggest long-term savings firm has warned, in a call for a sweeping government review of the pensions market.
In a statement after the King’s Speech today, Andy Briggs, chief of FTSE 100 Phoenix Group, called on ministers to launch a promised deep dive into the UK’s pensions landscape “sooner rather than later” to avoid the risk of a looming crisis for retirees.
Keir Starmer’s government set out plans to introduce a pension schemes bill over the next session of parliament today which will look to deliver “better outcomes” from pension savers and “support the government’s mission to deliver growth”.
Central to the plans will be a push to bring more of the UK’s fragmented pension system into consolidated superfunds in a bid to unlock investment into a wider range of assets, the government said.
However, an outline of the bill fell short of setting out a timeline for a review of the pension landscape, as detailed in Labour’s election manifesto.
“People are at risk across the UK of thinking they are saving at the right rate for their future when they are not,” Briggs, whose company administers around £283bn for savers, warned.
“Saving at the statutory minimum isn’t enough. The single biggest lever we can pull to secure savings adequacy is raising minimum contributions, which we’d like to see the government move towards as part of an adequacy review,” he added.
In its platform before the election, the government said it would launch a review of the pensions landscape to “consider what further steps are needed to improve pension outcomes and increase investment in UK markets”.
Briggs’s warnings point to a national shortfall in pension pots as the population shifts away from defined benefit pensions, in which savers were guaranteed a certain payout in retirement, toward defined contribution [DC] schemes. Phoenix has previously warned that some 14m savers risk retiring with less cash than they expected on DC schemes.
Ministers said today that the pension schemes bill, set to be delivered in the next session of parliament, could boost savers’ pots to the tune of £11,000.
However, it will look to do so by allowing savers to merge their individual pension pools and broadening the types of assets that funds can be invested in, rather than lift the amount that savers pay in.
As part of the bill, the government will look to ease the way that savers can consolidate their individual defined contribution pension pots, and a new ‘value for money framework’ will also introduce a test to ensure that defined contribution schemes deliver value.
“Value for money is another important component of better retirement outcomes. It’s good to see the emphasis being placed on financial outcomes for savers – not just potential benefits to UK plc,” said Becky O’Connor, director of public affairs at fintech firm PensionBee,