Beware of the pensions generation gap
November 25, 2015
Today’s commitment to the triple lock combined with a generation that have retired with generous defined benefit pensions, means that today's pensioners are better off than they have ever been, with increases in pensioner incomes outpacing those in work. Our analysis shows that pensioners are better off after receiving basic state pension rises higher than inflation rises since 2001. Pensioners will be nearly £1,000 better off a year, than if the basic state pension had tracked CPI.
While we must ensure that today's pensioners continue to have an adequate income, keeping an eye on future generations ability to retire is also critical. Today's confirmation that state pension age will be linked to life expectancy means that many in work will have to work longer and save harder than their parents to enjoy the same standard of living in retirement. In the run up to the Budget, we would encourage the Government to think carefully about the impact of pension reforms on helping working people save towards their retirement.
Our research with 1,200 UK adults shows that six in ten people are put off saving more into their pension because they don’t understand the pensions system. We believe that reforming pensions tax alone isn’t going to dramatically impact people’s motivation to save more towards their retirement. Efforts need to focus on improving saver awareness, increasing auto-enrolment contribution levels and improving financial education so people can plan for the retirement they hope for.
I believe that focus needs to be paid to encouraging the working population to save towards their retirement, otherwise the pensions generation gap will only increase further.