The UK's pension crisis will grow worse unless action is taken now, warns a panel of industry experts at a meeting hosted by Prudential.
The panel attributes its concern on the future of pensions to a number of factors including: the decline in occupational pensions which pay up to two-thirds final salary; the baby boomer generation cashing in on their housing equity to pay off debts and younger generations, saddled with student debts, struggling to get on the property ladder.
The panel calls for the industry to simplify language to open the financial and investment market to more consumers. It also wants IFAs to shorten product recommendation documents for clients.
More accessible financial education, particularly for lower income groups is also vital the group says including teaching Britons about the way inflation can erode the value of their savings.
Gary Shaughnessey, managing director of Prudential Life & Pensions, says: “There’s a great deal of education that needs to be done when it comes to retirement income planning.
"The average male aged 60 retiring today will live to 85, but their expectation for how long they are going to live is 75. The average pension pot at retirement is £25,000. It is stunningly low.
“Inflation across the economy is around 2.5% but between four and 6% for retired people. There is a complete lack of awareness of the impact that inflation will have on people’s retirement income generally. This is a huge issue that we talk about a lot but it still has not reached the consumer consciousness to the extent it should have.”
The panel also wants Government and industry to look at examples of best practice from other countries, including the Australian model where Government-backed help lines provide free advice on pension and retirement planning.
A greater use of wraps to further engage consumers in financial planning has also been recommended.
Prudential says: “The panel believed it would make it easier for consumers to seek financial advice because, in demonstrating more clearly their overall wealth, advisers will see them as being a more attractive proposition and will be more willing and able to provide holistic financial advice.”
The panel comprised Gary Shaughnessy, managing director of Prudential Life & Pensions; Steve Lewis, regional director of intermediary sales at Prudential; Stuart Bayliss, managing director of Annuity Direct; Paul Fife, managing director of Equus; Matt Ward, head of pensions at Defaqto; Jon King, chief executive of SHIP and Tom McPhail, head of pensions research at Hargreaves Lansdown.
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The increase in minimum AE contributions has had little impact on opt-out rates - with cessations after April increasing by less than two percentage points, data from The Pensions Regulator (TPR) shows.
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