Commenting on the Government’s expected state pension reforms, Raj Mody, head of pensions advisory at PwC, said:
“Greater simplicity and certainty on the state pension has to be good news for savers and pensioners. This will give people comfort about the base level of state pension they will receive, allowing them to plan more accurately for what additional savings they will need in retirement.
“The rising state pension age will force many people to reassess whether the contributions and savings they are already making will realistically equate to a comfortable retirement. For many, the harsh reality will be that they fall far short.
“Even with the introduction of auto-enrolment, the younger generation can’t expect as much from their employer’s workplace pension as their parents or grandparents. This will heap added pressure on building up adequate savings. PwC research shows that a new graduate being auto-enrolled on the minimum requirements is only likely to end up receiving a third of their final salary as a pension, even after saving for their entire working life.”
Linking state pension age with life expectancy
Raj Mody, head of pensions advisory at PwC, said:
“If the Government wants to link the state pension age with life expectancy, we expect a rise to age 68 may need to be brought forward at some point to around 2035 to keep pace with life expectancy projections. This means we could see the state pension age easily hit 70 by 2050.
"A school leaver just entering the workforce may have to start saving around £100 extra a month just to bridge the gap between the current state pension age of 65 and their likely state pension age by the time they reach that stage of their life, assuming they have no other source of income to rely on.”
Impact on workplace pensions
Raj Mody, head of pensions advisory at PwC, said:
“The changes will give employers yet another reason to close the few remaining final salary and defined benefit schemes still open to existing members, due to the increased costs of higher National Insurance.
“There's a real danger with these reforms that private sector employers will feel even more disenfranchised from workplace pension provision. Whereas Government can make overarching changes, like deferring state pension age for people who have yet to retire, it is virtually impossible for employers to do the same for members of their occupational pension schemes. The Government needs to recognise this and provide help by, for example, introducing overriding legislation to ease the way for employers."
|
