Only yesterday I was drafting an article which touched on the inadequacy of the minimum pension contribution rates under Auto Enrolment (AE) to provide a suitable level of pension income in retirement.
This is likely to be a major topic in the coming years, and one that will get much more oxygen once the first wave of compliance with AE has been completed. Yet it appears that the Association of Consulting Actuaries (ACA) are already pursing this very point. For more on this subject please see the following link:
As per the title of the above article, they are seeking a significant increase in total contributions by 2020. In reality, I think such a large increase in such a relatively short period of time is unlikely, particularly given the continued economic slump that the world economy is facing. Indeed, during my research yesterday, I came across this link to the BBC website, which provides stark evidence that the recovery from the downturn is slower than all recent recessions, up to and including the 1930′s! Just scroll down to the graph on “How recessions compare” and you will see the point I am trying to make:
https://www.bbc.co.uk/news/10613201
Given the above, I really can’t see the ACA’s point gaining any political traction until the economy is well and truly on the road to recovery.
However, when you are structuring your benefits packages (particularly with Auto-Enrolment in mind) it’s worth being aware that the legal minimums are by no means sufficient to provide a decent pension in retirement for most savers.
Best regards
Steve
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