The pensions industry cannot afford to be complacent despite the success of auto-enrolment, Pensions and Lifetime Savings Association chair Richard Butcher has said.
Speaking at the PLSA’s annual conference in Liverpool today, 17 October, Butcher said: “We’ve had success with policy, we’ve had success with governance, all of these things are good things, we’ve made good progress, but we can’t afford to be complacent. There is much more work that needs to be done,” he said.
For example, he noted that 80 per cent of people don’t know how much money need to save towards retirement, and that’s got to be a “train crash waiting to happen”. He added that over half of people think that the auto-enrolment minimum contribution rate is the government recommended savings rate.
“The average defined contribution pot at retirement is stuck stubbornly at around £30,000 and you and I know that £30,000 isn’t nearly enough to provide a sustainable income in retirement.
“According to the Financial Conduct Authority (FCA), over half of people who have accessed freedom and choice between April 2015 and September last year fully encashed their pots, and half of those people, took that money and put it into another savings product.”
Butcher said he can believe that it might be a good idea for a few people but not for the vast majority of people.
“It isn’t working as well as it should do and we can’t be complacent,” he said.
In addition, he also spoke about auto-enrolment and the need to increase contribution rates to 12 per cent, with “employers bearing a higher burden” of that contribution.