“AMNT has for many years been vocal in its call for action to ensure that workers, most of whom no longer benefit from the security of DB schemes, are able to build savings for the future in a cost effective manner. And this must be true for all in society, regardless of employment status, gender or ethnic background. So we are pleased to see that the statement from the Government highlights the worrying disparities in these areas” said Maggie Rodger, Co-Chair of the AMNT.

AMNT continues to support the findings of the 2004 Pensions Commission which concluded that people on an ‘average’ income would need the equivalent of two-thirds of their pay as a pension to enjoy a comfortable retirement and calls on the Commission to set this as a bench mark for the future. It is a sad fact that millions of workers will not achieve this level.

However, society has changed since the 2004 Commission reported and this should be a base target.

“We remind the Commission that the figure of two-thirds is based upon a society where most people own their homes. As ‘generation rent’ begins to reach retirement age in the next 30 years, then even two-thirds may not be sufficient to keep that generation’s elderly out of a diminished retirement. Any projections given for required savings rates or minimum standards in the future should bear in mind this fundamental generational change” Rodger continued.

It is now widely recognised that savers in whole of life collective DC could retire with a pension 30-50% bigger than those in individual DC schemes for the same contributions and multi-employer CDCs should provide an efficient vehicle going forward.

However, bearing in mind the societal changes mentioned above it is likely that a figure of approximately 12% of salary for auto enrolment, although a substantial improvement as a base level and providing close to two-thirds of final salary, will not be enough to give those still renting in their old age a comfortable retirement.  Bearing in mind the substantial additional costs being faced by future generations when compared with today’s pensioners - which include student loans and spiralling rental costs caused in part by a dire shortage of social housing and substantially increasing childcare costs - then reaching an acceptable savings rate seems even harder without substantial additional government or employer input.

But there are many other aspects to adequacy. In particular we are conscious of the lack of adequacy for those in multiple low income jobs whose employers currently do not have to contribute at all. (Solving this may well also help to close the ethnicity gap.)  Too often employer contributions (and tax incentives) are biased to give most to those who earn most and often nothing to those who earn little. Adequacy calls for a careful review of balancing who receives what tax rebates and enhanced employer contributions.

Adequacy needs to be reviewed to close the gender gap including ways to make pension contributions during maternity leave or caring leave, and making it a priority to apportion pension assets on divorce.

Adequacy is required for those in self employment who need an easy and effective way to make tax efficient pension savings.

Adequacy can be assisted through incentives to save easily for short term emergencies, and even house purchase deposits, alongside pension savings thereby encouraging and enabling members to balance short term and long term priorities.

AMNT acknowledges that there is no “easy fix” for the problems associated with pensions adequacy and welcomes the launch of the Commission.

“There are tough decisions to be made and no easy solution. However, we need to thoroughly test assumptions and systems and collectively find ways to ensure that people can be supported to save more during their working lives, in more efficient and productive financial products if a financially blighted retirement, and all that means for the wider economy, is to be avoided for many of our children and grandchildren” Rodger concluded.

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-Ends-

Notes to Editors

The Association of Member Nominated Trustees was established in September 2010 to bring together member-nominated trustees, directors and representatives of public and

private sector pension schemes to give trustees a collective voice, to provide mutual support and information exchange and to campaign on matters of concern.  In addition our membership is focussed on speaking on behalf of pension scheme members, because being a scheme member is a requirement for becoming an MNT and has a particular part to play in scheme governance.

Our members are from pension funds with collective assets of approximately £1-trillion.

For further information please contact Andrew Sharkey on 07711 825 439