PPI “What level of pension contribution is needed to obtain an adequate retirement income?”

“September’s “Defined contribution workplace pension market study” from the Office of Fair Trading (OFT), focused on what constituted ‘good value for money’ for scheme members. The IFoA’s concern is that this is only one aspect of the equation and the key question for the industry and policy makers to consider is what constitutes a ‘good outcome’ for scheme members. “This research from the PPI contributes towards the question on ‘good outcomes’.

“In a system where for a large part you get out what you put in, auto-enrolment (AE) and defined contribution (DC) will always be dominated by the question of ‘adequate contributions’. This research makes it clear that an adequate retirement income requires people to start saving as much as possible as soon as possible, but it is how you encourage people to save more and recognise the personal benefit of doing so that will have an impact. Clearly present measures are not in themselves sufficient so the question for the industry and policy makers is one of how can this be done? The IFoA continues to examine this question in the context of changing demographic and socio-economic data through research and consultations. Ultimately, understanding good outcomes for scheme members will lead the way to developing the right products and incentives for their delivery.”