Implement pension reforms or risk ‘lost decade’, ACA warns politicians 

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The Association of Consulting Actuaries has said political parties must focus on a “narrow, achievable and deliverable” list of priorities to ensure people build adequate levels of pension saving, in a ‘Pensions and Savings manifesto’ launched on Thursday, and warns of a lost decade in pension progress amid a “confusion of priorities”.  

With a general election due by January, the ACA has urged political parties to commit to completing current pension reforms where there is broad consensus, such as pensions dashboards, value for money, extending auto-enrolment to what has been agreed, and finalising the new defined benefit funding regime, as well as introducing multi-employer collective defined contribution schemes. 

ACA chair Steven Taylor said despite these areas seemingly enjoying cross-party support, they have so far not translated into firm outcomes for savers, criticising that they have been “beset by continued delays and confusion of priorities”.   

He urged each party to commit to completing this list of policy priorities, warning the UK risks “a lost decade of negligible progress since the introduction of automatic enrolment”.  

The ACA wants to go further, however, and has set out a list of changes it wants to see to later life provision. Auto-enrolment should re-emerge as a key priority, with the ACA saying a “fresh boost” is needed that includes a plan for minimum contributions to reach at least 12% within 10 years, as well as including the self-employed and those in gig economy jobs. Ahead of such increases, there should also be flexible ‘sidecar’ savings, the ACA argued.  

For people reaching retirement age, the actuaries organisation wants to see default decumulation pathways, saying CDC could support this. It is calling for a default CDC provider similar to how Nest operates for DC savers, with Taylor claiming that CDC pensions could outperform traditional annuities for DC savers by up to 50%. Only one employer, Royal Mail, has so far agreed to putting in place a CDC scheme for employees, but the pensions industry and actuarial profession are hoping it could gain more traction in the decumulation space.  

Alongside pensions policy, the ACA also considered tax and spending in its manifesto. The Treasury should avoid “knee-jerk changes” to the pensions tax regime, the ACA said, while the state pension triple lock should be dropped after 2026 and replaced with an earnings-link and less frequent reviews, making it potentially less volatile. A full review of the appropriate level of state pension should also be carried out “and, if necessary, revised upwards”, the association added, suggesting a five-yearly review cycle.   

Taylor said: “The annual debate over the triple lock distracts from the more important debate about the desired level of state pension. Government should review a new, potentially higher, baseline for the state pension and then apply a more balanced annual adjustment mechanism.”  

Lastly, the ACA is calling for a better social care regime. The Health and Care Act 2022 introduced a cap of £86,000 on the amount people in England will have to pay for personal care, though this excludes living costs. However, the plan has not been put into effect, and will not be until after the election. Research by provider Aegon in 2023 found that despite people being increasingly likely to need care, only a quarter had considered how they would pay for it. Aegon has also called on political parties to offer clarity on social care.  

The ACA suggests a further review of the Dilnot Commission’s 2011 findings, to outline a social care package that includes extra taxpayer funded spending alongside initiatives such as tax-free social care vouchers for those supporting older relatives in care and consideration of a social insurance scheme to “help younger people better to plan ahead than the present older generations”. 

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