Living standards in later life - Discussing pension adequacy

Living standards in later life - Discussing pension adequacy

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  Wifi 2QAG_Guest Welcome_Guests #SavingEnough October10, 2024 @resfoundation Living standards in later life Are auto-enrolled workers saving enough for their retirement? Lord Adair Turner, Economist and Former Chair of the Pensions Commission Molly Broome, Economist, Resolution Foundation Chair: Lord David Willetts, President of the Resolution Foundation
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  2 @resfoundation The Pensions Commissionrevolutionised pension saving
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  3 Possible derivation ofthe Pensions Commission’s target replacement rate for a median earner: 2002-03 Notes: Our modelling uses £21,250 for median earners in 2002-03. Source: RF analysis of Pensions Commission, Pensions: Challenges and Choices: The First Report of the Pensions Commission; ONS, Annual Survey of Hours and Earnings. @resfoundation The Commission proposed a target replacement rate of 67%
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  4 @resfoundation The Pensions Commission’starget replacement rate for a median earner in 2024-25 Notes: Our modelling uses £36,985 for median earners in 2024, based on April 2023 earnings adjusted to April 2024 levels using earnings growth. Source: RF analysis of ONS, Annual Survey of Hours and Earnings. 72% is the new 67%
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  5 @resfoundation The Pensions Commission’starget replacement rates in 2002-03 and their equivalent in 2024-25, by earnings band Notes: Our modelling uses £17,700 for low earners, £25,150 for lower-middle earners, £36,985 for median earners, £60,600 for upper-middle earners and £74,600 for high earners. These represent the earnings bands from the Pensions Commission’s first report, uprated to April 2024 using earnings growth. Source: Resolution Foundation analysis. Tax changes have increased TRRs more for lower earners
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  6 @resfoundation Target pension incomeas a percentage of earnings for the median earner at the point of retirement, as envisioned by the Pensions Commission Today, policy is set to replace 51% of median earnings. Source: Figure 6.33 in Pensions Commission, A New Pension Settlement for the Twenty-First Century. At least 45 percentage points was to come through policy
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  7 @resfoundation Gross income replacementrates from the State Pension and auto-enrolment versus updated target replacement rates, by earnings band: 2024-25 Notes: Our modelling uses £17,700 for low earners, £25,150 for lower-middle earners, £36,985 for median earners, £60,600 for upper-middle earners and £74,600 for high earners. See report for full chart notes. Source: RF analysis of Bank of England, Yield curves; The Annuity Project from William Burrows; The Pensions Commission, A New Pension Settlement for the Twenty-First Century: The Second Report of the Pensions Commission; ONS, Annual Survey of Hours and Earnings; OBR, Economic and fiscal outlook – March 2024. A one size fits all policy leaves higher earners short of target
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  8 @resfoundation Should policy domore to boost pension saving?
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  9 @resfoundation Gross annual labourincome of full-time employees before retirement versus gross annual income after retirement: UK, 2005 to 2015 Notes: Financial values adjusted to April 2024 prices using CPIH index. Gross annual income data variables are the average of two or three years of data depending on availability. Labour income for those that are full-time employees in the year before retirement. The 10-year period after the Pensions Commission is based on BHPS wave 15 to Understanding Society wave 5. Source: RF analysis of ISER, British Household Panel Survey and Understanding Society; ONS, CPIH Index. 1. Most retirees have replacement rates less than target
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  10 @resfoundation Disposable wealth offull-time employees on median earnings versus modelled target wealth to be on track for a 72 per cent target replacement rate, by age group: GB, 2018-20 Notes: Financial values adjusted to April 2024 prices using the CPIH index. Median earnings are approximated by taking the range of £32,600 to £46,599. Disposable wealth includes net financial wealth, other property wealth and pension wealth. Disposable wealth holdings for full-time employees aged 60-64 has been interpolated by increasing wealth in line with the change for the whole population. See report for full chart notes. Source: RF analysis of ONS, Wealth and Assets Survey. 2. People often have other financial resources to draw on
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  11 @resfoundation Disposable wealth offull-time employees on median earnings versus modelled target wealth to be on track for a 72 per cent target replacement rate, by age group: GB, 2018-20 Notes: Financial values adjusted to April 2024 prices using the CPIH index. Median earnings are approximated by taking the range of £32,600 to £46,599. Disposable wealth includes net financial wealth, other property wealth and pension wealth. Disposable wealth holdings for full-time employees aged 60-64 has been interpolated by increasing wealth in line with the change for the whole population. See report for full chart notes. Source: RF analysis of ONS, Wealth and Assets Survey. 2. People often have other financial resources to draw on
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  12 @resfoundation Proportion of theworking-age population living in families with savings below a given threshold, by income tertile: GB, 2018-20 Notes: Savings and income measured at the benefit unit level. Savings defined as current accounts in credit, value of savings account, value of ISAs and value of national savings products. Savings thresholds are cumulative, for instance, savings of less than £1,000 also includes those with savings of less than £100. 3. Millions of families don’t have enough precautionary savings
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  13 @resfoundation 1. Clarify thepurpose of auto-enrolment. 2. Explore introducing more flexibility and accessibility. 3. Articulate the state’s role in helping households manage risk and uncertainty in pensions. Key issues for the Government’s pensions review
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  Wifi 2QAG_Guest Welcome_Guests #SavingEnough October10, 2024 @resfoundation Living standards in later life Are auto-enrolled workers saving enough for their retirement? Lord Adair Turner, Economist and Former Chair of the Pensions Commission Molly Broome, Economist, Resolution Foundation Chair: Lord David Willetts, President of the Resolution Foundation
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  15 @resfoundation Final salary andaverage salary replacement rate under today’s auto-enrolment system, by earnings group: 2024-25 Notes: Our modelling uses £17,700 for low earners, £25,150 for lower-middle earners, £36,985 for median earners, £60,600 for upper-middle earners and £74,600 for high earners. Source: RF analysis of Bank of England, Yield curves; The Annuity Project from William Burrows; The Pensions Commission, A New Pension Settlement for the Twenty-First Century: The Second Report of the Pensions Commission; ONS, Annual Survey of Hours and Earnings; OBR, Economic and fiscal outlook – March 2024. Targeting average earnings would smooth consumption better