Our Retirement Future A Long Time to Wish We d Done More

Transcription

1 Adrian Boulding Pensions Strategy Director Legal & General Our Retirement Future A Long Time to Wish We d Done More Chairman Pension Quality Mark 7 Agenda State Pensions Private Pensions The Pensions Commission ten years on! Disaster Triumph 8 1

2 State Pension is Changing New system 6 th April 2016 Serps / S2p withdrawn New Single Tier Pension Just above the means test Currently per week Increases will be triple locked, best of CPI Earnings inflation 2.5% pa 9 How much are Government Spending on the new pension system? Steve Webb says Cost neutral for Government As many gaining as losing out A fairer system Source : Daily Mail, 20 th March 2013 George Osborne says We re saving 5.5bn 5b pa by ending contracting ti out Source : Budget Documents, March 2013 Experts say Final salary schemes under threat 10 2

3 How much more will I get? Source : Institute for Fiscal Studies, IFS Report R82 11 Living on the State Pension Greg Kingston s One Week State Pension Challenge Day 1 : I can t afford the 3 for 2 offers at the supermarket Day 2 : Trip to see my son cripples the budget Day 3 : Last night s leftovers for lunch Day 4 : Jacket potato Day 5 : Lost 3 in the street calamity! Day 6 : Saw an advert for an ISA no chance Day 7 : Spaghetti hoops on toast t Spare a thought for those whose challenge doesn t end after a week, but only when they pass away 12 3

4 How much do I need to save? Pensions Commission say average person needs 2/3 rd replacement rate to live comfortably in retirement More for low earners Less for high earners National average wage = 26,000 pa Comfortable retirement income = 17,000 pa State Pension = 7,700 pa Private Pension Required = 9,300 pa Needing a Pension Pot of 200,000 Best annuity from MAS year old, single life, 2% increases Money purchase is a lottery Source : Pensions Policy Institute 14 4

5 Where do people spend their money Source : Blanchett : True Cost of Retirement 15 Pensions Commission Turner, Drake and Hills concluded Save More OR Work Longer OR Pay Higher Taxes OR Have Poorer Pensioners 16 5

6 More savers auto-enrolment Auto-enrolment will boost membership levels in workplace pension schemes Another 7 million people will start saving in a pension 1 m into NEST ½ m each into L&G and People s Pension ¼ m into NOW Pensions figures up to April 2014 Largest effect on Low earners Young employees Minority ethnic groups Women 17 16/05/ :10 Legal & General Presentation Department Author Author More savers, but less savings To counter the cost of more savers, employers have Started people e on a low contribution o rate Restricted the level of employer matching contributions Closed expensive final salary schemes Lost interest in workplace ISA 18 16/05/ :10 Legal & General Presentation Department Author Author 6

7 Defaults can drive savings down! Many employees will stick at the default level Distribution of Contribution Rates of scheme members % Employee Contribution Rate (%) Before Auto-enrolment With Auto-enrolment 19 16/05/ :10 Legal & General Presentation Department Author Author Source : Madrian & Shea The Power of Suggestion We are working longer Source : ONS Labour Force Survey 20 7

8 Increasing State Pension Age 2010 : Women s SPA started to rise 2018 : Women s SPA reaches : Men & Women SPA : Men & Women SPA 67 Regular reviews and Osborne s principle 1/3 of adult life in retirement Around 2035 : SPA 68 Around 2047 : SPA Raising SPA is unpopular I feel I ve been robbed of two years of my life Barbara Case study, Communication Workers Union osteoarthritis in my thumbs and wrists makes the lifting and cleaning work in my job harder Scottish Pensioners short-changed by 11,000 if English SPA adopted Shona Robison SNP Minister 22 8

9 Pay higher taxes IEA Report March 2014 To fund future pension and welfare promises already made : Tax rise of 17% GDP needed More than 300bn pa Larger than the entire NHS Budget Crippling Impossible to implement without choking off economic growth Source : IEA The Government Debt Iceberg 23 Poorer Pensioners Source : NAPF Securing the Future of Pensions

10 There are isolated instances of good practice and hope for more savings FTSE 100 Company, 7000 staff Stakeholder Pension Staff pay 5% Employer Pays 10% Auto-enrolment staging date April 2013 Number of opt-outs Can be fitted in a mini-bus Main reason for opting-out Fixed Protection Secret of success Unprintable here 25 Adrian Boulding Pensions Strategy Director Legal & General Our Retirement Future A Long Time to Wish We d Done More Chairman Pension Quality Mark 26 10