Pensions - Articles - Adequacy should be the rallying cry for the PLSA


New Pensions and Lifetime Savings Association (PLSA) Chair, Emma Douglas, will use her first Annual Conference opening speech to tell delegates that achieving pensions adequacy is one of her top goals.

 Addressing the delegates to the PLSA’s digital Annual Conference 2021, Ms Douglas will explain that she’s aware there is a strong level of consensus across the industry about the need to provide security for individuals when they stop work.

 “The PLSA’s mission statement is to help everyone get a better income in retirement and we all know that the amount you put in is the biggest determinant of what you’ll get at retirement,” explained Ms Douglas. “The savings gap is a big societal problem, the current amount of money going into long-term savings, even with auto-enrolment at 8%, is inadequate for most and we are walking into a pension crisis.

 Auto-enrolment has seen more than 10 million people saving through workplace schemes, with the opt-out rate has remaining low, despite a gradual increase in contributions.

 “It’s an undoubted policy success, but I see it as a great start rather than ‘job done’,” said Ms Douglas, adding. “There is a danger that the ‘long-term savings can’ will be kicked down the road as people hope that they’ll be able to save more at some point in the future.

 “The 2017 AE review came up with some important recommendations for broadening and deepening the range of auto-enrolment as there are still a lot of workers, in particular part-time workers, many of whom are women, who aren’t covered by the AE regime. It’s not yet fully inclusive and we need it to be. We are supportive of the removal of the lower earnings limit, so that contributions are paid from the first pound of earnings, and of reducing the auto-enrolment age to 18.

 “All of this will cost money. More people saving will mean that employers, the government and individuals need to put more money into long-term savings. There is definitely an issue around affordability, but people will still need an income in retirement. The government are talking about implementing these reforms in the mid-20s. We need to hold them to that.

 “Achieving pensions adequacy is my main rallying cry as the new Chair of PLSA. Encouragingly there is already a strong level of consensus across the industry about the need to widen the AE remit, to support DB schemes and support for increasing contribution rates, where it is affordable. We need enough money going into our pension funds so that they can continue to provide security for individuals when they stop work and so help everyone achieve a better income in retirement.”

 The PLSA has consistently called for reforms to extend the reach of automatic enrolment having outlined its vision for pension adequacy in its 2018 publication Hitting the Target, following up with the launch of the Retirement Living Standards in 2019.

 Ms Douglas’s will add that ensuring the increase in contribution rates to 12% is still a key priority for the Authority.

 “In ‘Hitting the Target’ we called for a gradual increase in contributions to 12% by 2030 – split 6% employer, 6% employee, Ms Douglas will state. “Covid may stretch this timeline, but for many of those earning over £20,000 this is the level at which they need to save in order to have a chance of getting closer to the ‘Moderate’ levels of our Retirement Living Standards.

 “Again, there is the cost to consider, especially for employers, together with the important point that 12% may be over-saving for those on lower incomes who are likely to remain on low incomes for their working life. So, alongside the 12% we also see the need for some form of opt-down mechanism, or reduced rate for lower earners, or sidecar savings.”

 To find out more about Annual Conference 2021 click here.
  

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