The UK’s Pensions and Lifetime Savings Association (PLSA) has published a set of descriptions of different standards of living in retirement, which it hopes will help people picture their future financially – and so engage with their pension.
The pensions industry body, which launched the concept at its annual conference this morning, said it wants schemes representing 90% of active savers to adopt the new UK Retirement Living Standards by 2025.
Nigel Peaple, director of policy and research at the PLSA, said: “The Retirement Living Standards will support better saver engagement.
“They distil robust, in-depth research with the public into an easy to understand basket of goods that helps people picture the future – and relatable figures that can provide a powerful and practical tool for encouraging engagement with saving.”
He said a recent PLSA survey showed 76% of people with a workplace pension agreed the standards would help them know if they were on track for the lifestyle they wanted in retirement.
“The PLSA looks forward to widespread adoption of the Retirement Living Standards to transform the way people think about saving for spending in later life”
Nigel Peaple, PLSA
“The PLSA looks forward to working closely with the pensions industry to ensure widespread adoption of the Retirement Living Standards to transform the way people think about saving for spending in later life,” Peaple said.
The standards set out three levels of wealth in retirement – minimum, moderate and comfortable – based on a basket of goods and services, from food and drink to holidays. The PLSA said they could be summed up as 10k-20k-30k for individuals and 15k-30k-45k for couples.
The association said it would try to ensure the pensions sector and the government adopted the new illustrative framework to help more people plan effectively for retirement, adding that it was working with the Money and Pensions Service to include them in their tools, such as the Money Advice Service pension calculator.
Consultancy Hymans Robertson said it had supported the development of the standards and signed up as an “early adopter”.
Michael Ambery, the firm’s head of defined contribution (DC) provider relations, described the launch of the standards as “great news for the industry and for retirement aspirations across the country”.
“Pensions can be complex, so many people find it hard to know if they are saving enough to be able to retire, or reduce their working hours, when they’d like,” he said.
“Let’s hope that this is a lightbulb moment for pension savings”
Laura Myers, head of DC at consultancy LCP
Meanwhile Laura Myers, head of DC at consultancy LCP, said the standards would give people more clarity and tangible savings goals based on up-to-date research and numbers.
“Let’s hope that this is a lightbulb moment for pension savings,” she said. “For millions of savers, the ability to know if they are on track with pension saving for the retirement they want is now going to be so much simpler.”
Separately, Gregg McClymont, director of policy at multi-employer DC provider The People’s Pension, said the new PLSA standards offered members “a welcome rule of thumb starting point for complex retirement conversations”.
More information about the standards can be found here.