This is what PPI tell us they have found
The PPI’s produced new modelling showing a fifth (20%) of the UK working population face retirement adequacy risks despite relatively high earnings.
The report, ‘UK Pensions Framework: How Work Shapes Retirement Outcomes’, sponsored by Aviva, provides modelling of six representative worker profile demonstrating that a relatively high earner, with a greater capacity to save (Profile A), may still have comparatively lower pension contributions to someone with lower earnings and reduced capacity to save (Profile F).(1)
The research highlights employer contributions as one of the key drivers of contrasting pension outcomes between the two groups.
As the Second Pensions Commission prepares to make recommendations to the government on the broader questions of adequacy, fairness, and sustainability within the UK pensions system – and with a third State Pension age review also launched last year – the study challenges assumptions that the policy issue of retirement adequacy can be understood primarily through earnings.
The analysis explains that a comparably highly paid private-sector worker (Profile A) may build relatively less pension wealth than a lower paid public sector worker (Profile F), due to the former’s employer pension provision being weaker, with contributions close to minimum levels, or remuneration including elements that are not reflected fully in pension contributions.
The investigation notes Profile A workers therefore face the potential risk of not being able to maintain working life living standards in retirement, if they stay within Profile A throughout their careers.
Conversely, Profile F, just over a tenth (11%) of the UK working population, may have lower earnings that may constrain their capacity to save, but enjoy stronger employer pension provision and greater access to Defined Benefit arrangements that provide greater support for retirement adequacy.
The research concludes that policy on adequacy requires a more holistic perspective that considers where additional saving can realistically come from, how earnings and pension saving are unevenly distributed across the working population, and how institutional pension provision plays a critical role in retirement adequacy.
I don’t think we need to be surprised that what’s paid for our retirement by the boss is part of our pay package.
The PPI asks us to recognise we’re exchanging today’s pay cut for tomorrow’s wage in retirement.
We currently expect our workplace pension to do a lot of things including paying off mortgages with cash , paying the inheritance tax bill and all the other things we promised us (buying the new car, holiday, golf clubs etc).
But a pension has been distorted to do things. What most people still think of when the word “pension” arises is what they get from the state or if they’re lucky the lifetime income they get from being in a proper pension scheme.