Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • Sections
  • News

Alarm raised over retirement savings shortfall

Open-access content Wednesday 28th April 2021
Alarm raised over retirement savings shortfall

Many more members of defined contribution (DC) pension schemes in the UK are heading to retirement with inadequate savings than previously thought due to outdated modelling, new analysis suggests.

The research by PTL highlights how DC adequacy models are failing to consider major factors that influence savings, such as the decline in home ownership, and more people renting in later life.

Another factor ignored by models is that families in the middle of the wealth distribution scale are set to inherit less because their parents are having to pay for long-term care.

Furthermore, pension savings are likely to become the “de facto funder” of long-term health costs in the UK because successive governments have continued to duck the issue, according to the researchers.

“DC adequacy models make assumptions about all sorts of things, including certain lifestyle and social factors, the problem is that many of those assumptions are out of date,” said Richard Butcher, managing director of PTL.

“Unless we fix the models, we’ll have many more unhappy members and, far more importantly, more members living below the standards of living to which they aspire. Perhaps even in poverty.

“Beyond the human tragedy, this could cause significant damage to the brand of pension saving which has already suffered reputational issues over the years.”

The latest analysis also suggests that the “myth” of the graduate premium, in the case of some degrees, imposes a significant break on the ability of those affected to save for their retirement.

Financial fragility, although not a new problem, additionally means that pension scheme members are likely to opt out of saving in response to what many of us would consider a relatively minor financial event.

Butcher said that the impact of Brexit and COVID-19 on some employers has made it impossible for blanket increases in contributions, and that the government will need to focus what few resources it has left on growth generation.

“On the positive side, the pension system is becoming progressively more efficient, which means incremental gains can offset the impact of these factors,” he continued.

“Auto enrolment also helps, although the contribution rate remains too low for it, alone, to fix the problems. What would make a material difference is an increase in contributions. We need to aim for around 12% of all earnings.”

 

Image credit: iStock

Author: Chris Seekings

You may also be interested in...

IFoA unveils findings of its Great Risk Transfer campaign

IFoA unveils findings of its Great Risk Transfer campaign

The Institute and Faculty of Actuaries (IFoA) has today published practical solutions for how individuals can take greater control of their finances following its Great Risk Transfer campaign.
Wednesday 21st April 2021
Open-access content
Nearly half of early UK retirees were forced out of work

Nearly half of early UK retirees were forced out of work

Nearly half of UK adults who have retired earlier than planned were forced to stop working due to ill health or redundancy, new research from Just Group has uncovered.
Monday 17th May 2021
Open-access content
Regulators launch call for input on improving pension outcomes

Regulators launch call for input on improving pension outcomes

The Pensions Regulator (TPR) and Financial Conduct Authority (FCA) have today launched a call for input from the pensions industry to find out how people can be better supported when saving for retirement.
Tuesday 18th May 2021
Open-access content
Mandatory insurance coverage proposed post-Covid

Mandatory insurance coverage proposed post-Covid

Governments should consider introducing mandatory provision of income protection insurance following the COVID-19 crisis, research by the University of Oxford and Zurich Insurance Group suggests.
Wednesday 19th May 2021
Open-access content
Professional pension trustee market grows rapidly

Professional pension trustee market grows rapidly

Professional trustee firms are growing in size and influence as they become more prevalent on boards and increasingly take sole responsibility for running UK pension funds, new research by Isio has uncovered.
Tuesday 27th April 2021
Open-access content
COVID-19 unlikely to lead to large reduction in pension liabilities

COVID-19 unlikely to lead to large reduction in pension liabilities

The UK's defined benefit (DB) pension schemes are unlikely to see a large fall in their liabilities due to the COVID-19 pandemic, research by Lane Clark & Peacock (LCP) suggests.
Tuesday 20th April 2021
Open-access content
Filed in
News
Topics
Pensions
Finance
Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Senior Reserving Analyst

London (City of)
Negotiable
Reference
149485

Senior GI Modeler - Capital and Planning

London (Central)
£ excellent
Reference
149436

Risk Oversight Manager

Flexible / hybrid with a minimum of 2 days per week office-based
£ excellent
Reference
149435
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ