Forthcoming regulations should focus on making the UK pension system more flexible for defined contribution (DC) savers, according to speakers at the Pensions and Lifetime Savings Association’s (PLSA) annual conference in Manchester.
Helen Dean, chief executive of £8bn ((€9.3bn) DC master trust NEST, called for a more holistic approach to retirement savings, taking into account long-term and short-term savings as well as “scalable, affordable solutions” for the decumulation stage, in particular for lower earners.
“Automatic enrolment has been a great thing – it’s got people saving, and it’s a great foundation to build on,” Dean said. “But having built the foundations, we now need to build the house.”
She highlighted women and self-employed workers as two groups requiring more flexibility than the current DC system allows.
Margaret Snowden, chair of the Pensions Administration Standards Association, added: “I think we make it hard for people to save sometimes by insisting that they save X percent every week or every month without fail.
“A little bit more flexibility to allow them to increase or decrease contributions as they go through life would be favourable. We need our systems to be a lot more flexible, to cater to what the members actually do.”
Bill Galvin, chief executive of the Universities Superannuation Scheme (USS), the UK’s largest pension fund, echoed calls for flexibility to help cope with the rising cost of retirement provision and help individuals “manage through changes in circumstances and changes in their position”.
Dean also highlighted research being done by NEST’s Insight arm into the potential benefits of so-called “sidecar savings”. NEST launched a pilot programme earlier this year designed to help auto-enrolled savers build up an emergency pot of liquid savings alongside their pension.
She cited Harvard University research that had shown benefits for individual savers in terms of health, financial wellbeing and pension saving, and called for more research into similar areas.
“There’s quite a bit of academic research looking at… how can you translate a long-term goal into a short-term goal for someone,” Dean added. “Should you talk about saving a certain amount of money this year? Or is it better to say, ‘you’ve bought a year of retirement’? We need to understand what works in practice: try different things with cohorts of members and do proper A/B testing to see what works.”
The PLSA this morning launched a set of “Retirement Living Standards”, an illustrative framework to help individuals picture the lifestyle they want when they retire and what it might cost.
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