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The Actuary The magazine of the Institute & Faculty of Actuaries
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Are we saving enough?

The ABI’s report ‘The State of the Nation’s Savings 2004’ reveals public support for key reforms to state and private pensions. In particular:

  • 47% of the public believe that extra spending on state pension provision should help those who cannot afford to save and encourage people who can save to do so. Only one in four support alternative proposals for a higher basic state pension for everyone.
  • A growing percentage of the public believe that individuals must take the main responsibility for providing for their retirement income – up to 42% from 35% a year ago.
  • There is wide acceptance among the public that current demographic changes mean that people will either have to work longer (supported by 37%) or save a higher proportion of their salary (29%) than their parents to generate an acceptable standard of living in retirement.

At its Saver Summit 2004, the ABI will also publish policy proposals that build on this public support for change and respond to the challenge for new thinking set out in the Pensions Commission’s recent report. The ABI is proposing:

  • State pension reform which would address the disincentives to save created by means testing by increasing the state second pension for lower earners, and provide effective incentives to save for those who can afford to do so by improving contracting out.
  • Action to encourage greater pension contributions from employers through a new pension contribution tax credit.
  • Greater provision of financial advice through the workplace.

‘The State of the Nation’s Savings 2004’ also includes a detailed picture of the state of under-saving in the UK, across age groups, income bands, and sex. Under-saving is no longer a phenomenon of the traditional under-saving groups such as women and the self-employed. Levels of public confidence in pensions remain low. Just 3% of people think that state benefits will provide a comfortable income for them in retirement. Only 5% of the population say that they are ‘very confident’ that they will have enough to live on in retirement.