National Retirement Income Targets proposed
12 October 2017
The Pensions and Lifetime Savings Association (PLSA) has launched a major new consultation ‘hitting the target’ designed to help people define and meet their retirement goals.
Hitting the target – Delivering better retirement outcomes seeks to consult on the development of a set of new national retirement income targets and to look at what changes to the current retirement saving system would make this possible. The PLSA will also be engaging with government as part of the process.
National Retirement Income Targets
National Retirement Income Targets (RITs) – which are currently used successfully in Australia – provide savers with tangible income goals which take into account what they need to save in order to achieve different standards of living in retirement (minimum, modest and comfortable).
This will address one of the key challenges facing savers as there is currently no widely accepted and generally understood target for retirement income. PLSA research shows that more than three quarters (77%) of people admit that they do not know how much they need in later life and four out of five people (80%) said that a national retirement income target would help them plan for retirement.
As part of the consultation further in-depth analysis will be undertaken to determine exact income levels and the PLSA welcomes views from interested parties. As part of this initial research, consumers were asked for their views and those between 55 and 64 years old suggested that for a single person, the level of income required in order to have a certain standard of living in retirement would be:
- Minimum (£10,000 to less than £15,000)
- Modest (£15,000 - £25,000)
- Comfortable (more than £25,000)
Helping to hit the target
Whatever level targets are set at, savers will need help reaching them. As part of the consultation, the PLSA will be looking at the following areas to help them do so:
- How can we bring more people into the scope of automatic enrolment (AE) and spread the benefits of a successful implementation?
- Should the current system of tax relief be modified to support savers in achieving the new retirement income targets?
- How can we gradually increase the level of minimum contributions into AE – beyond those already planned - without discouraging people from saving?
- Can we do more to help people turn their property wealth into retirement income? Can pension schemes play a role in helping unlock the supply of housing which people need?
- How can we support realistic extensions to working lives?
- How can we ensure that people get what they want when they turn their pension savings into income? What are the respective roles of defaults and engaged decision-making?
- How can we let people know about their money in ways and at times which make sense to them? How do we improve engagement by using simple standardised messages?
Graham Vidler, director of external affairs at the Pensions and Lifetime Savings Association, said:
“Savers will need support as they work to achieve the Retirement Income Targets and we need to consider what might need to change within the UK retirement and savings market to facilitate these steps forward. Our report sets out some of the changes we think are necessary but we want everyone with an interest in the nation’s retirement future to respond - challenging, improving and building on our proposals.”
The PLSA ask that responses to this consultation are submitted by 12 January 2018. The PLSA will engage with their members and relevant stakeholders before and after this date and will be holding a series of roundtable events with PLSA members and stakeholders from the pensions and lifetime savings industry, as well as other interested parties.