Labour’s new pensions bill may be overlooking a crucial issue concerning retirement savings. The King’s Speech last week, outlining the new Government’s priorities, unexpectedly included a pensions bill aimed at broadening pension investments.
However, Richard Parkin, head of Retirement at BNY Investments, believes the draft legislation fails to address a significant problem for pension savers. He stated: “The key issue for UK pensions is that of adequacy. Improving investment and reducing costs is helpful but if there’s not enough being saved in the first place, they aren’t much help.”
While acknowledging that it’s never an ideal time to ask people to boost their pension contributions, he stressed this should be a priority. The expert suggested: “If we increase contributions gradually, and share that between employees and employers, then we can deliver better outcomes at retirement without too much pain today. ”
Potential changes that could help in these efforts include the expansion of auto enrolment, which has been legislated but not yet implemented. The scheme is set to be extended to anyone aged 18 and over, as opposed to only those aged 22 and over.
Currently, you must earn above £6,240 to be auto enrolled, but this threshold is being expanded to all earnings. Mr Parkin also said: “Another key change is to improve how much help people can get without having to take full financial advice.
“This will allow pension providers to guide their members towards better choices up to and at retirement.
“Some good work has already been done by the Treasury and the Financial Conduct Authority here, but it needs to be progressed quickly to make sure people are making the most of their retirement savings.”
Those planning for retirement might also want to verify how much state pension they are entitled to. This can be done using the state pension forecast tool on the Government website. Currently, the full new state pension stands at £221.20 a week.