The Pensions and Lifetime Savings Association (PLSA) has launched a consultation 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 on the changes to the current retirement saving system necessary to meet those targets.
With 13.5 million active members of UK workplace pension schemes, the PLSA is seeking views from companies on the issue of realistic extensions to working lives.
Identifying how much you need to save for retirement is a significant challenge for most people, with only 16% saying they know much they would need to achieve the standard of living they hope for in retirement. Consequently, following the end to the Default Retirement Age, more people are working longer to achieve the level of income they desire.
As part of this consultation, the PLSA is seeking views from employers as to how a set of principles which facilitate later life working might be developed. In addition, they are also asking how the pensions industry can raise awareness of the options around drawing pensions while employed as some people cease work as they believe they cannot access their retirement savings until they do so.
National Retirement Income Targets:
All of these proposals are designed to support the introduction of National Retirement Income Targets (RITs). These are currently used successfully in Australia and 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).
The PLSA hopes this will address one of the key challenges facing savers as there is currently no widely accepted and generally understood target for retirement income and more than three quarters (77%) of people admit that they do not know how much they need in later life. Four out of five people (80%) say that a national retirement income target would help them plan for retirement.
As part of the consultation further analysis will be undertaken to determine exact income levels and the PLSA is seeking views from interested parties.
However, as part of the initial research, consumers were asked for their views and those between 55 and 64 years old – who are arguably most likely to be knowledgeable - suggested that for a single person they might be minimum (£10,000 to less than £15,000), modest (£15,000 - £25,000) and comfortable (more than £25,000).
In addition looking at how working longer might help peoples retirement prospects, as part of the consultation, the PLSA will be looking at the following areas to help them do so:
Graham Vidler, director of external affairs at the PLSA, 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 this step 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.”