As the second Pensions Commission builds towards its landmark Final Report next spring, this crucial new research provides a detailed assessment of how the recently proposed reforms to the triple lock will affect a saver’s ability to reach pension adequacy benchmarks.
The independent study, authored by leading economist Carl Emmerson, partner at London Economics, argues that the State Pension and workplace saving need to be considered together when assessing future retirement adequacy, because decisions about the future level and uprating of the State Pension will affect how much people need to save privately. It also argues that the Pensions Commission should use its platform to highlight wide-ranging structural barriers to retirement adequacy that emerge from outside the pension system, including to labour and housing markets.
Whilst automatic enrolment stands as one of the UK’s most successful policy reforms, the research highlights that millions of savers may still be on track for inadequate retirement incomes. It finds that changes to the State Pension uprating regime could mean that many savers need to contribute more to their workplace pensions to achieve adequate retirement outcomes.
The report finds that middle earners face the greatest risk of under-saving. At the same time, policymakers must be mindful of the pressures that higher pension contributions could place on lower earners. To address this challenge, the report calls for higher default automatic enrolment contributions, an increase in the upper earnings threshold to around £65,000, and targeted protections for lower earners.