"Pension Reforms Could Broaden The Role Of Private Pensions In Supporting Retirement" Says Pensions Policy Institute Report

In the future, more pensioners are likely to receive retirement income from private pensions as a result of Government reforms to introduce auto-enrolment into workplace pensions, according to new research published today by the Pensions Policy Institute (PPI).

At present, approximately 28% of the income pensioners receive is through private pensions, while both state and private pensions combined provide the majority of retirement income for most pensioners - around 60% of retirement income on average, although low earners are likely to receive a higher proportion of their income from the state. 

Retirement income and assets: how can pensions and financial assets support retirement? is the third report in the PPI series looking at the future of retirement income and assets in the UK.  The report considers the role that state and private pensions and other financial assets are likely to play in supporting retirement incomes today and in the future.

Commenting on the report, Chris Curry, PPI Research Director, said "The major Government reforms about to be implemented for state and private pensions will significantly alter the retirement income landscape in the UK."

"The Government's state and private pension reforms are likely to mean that more pensioners will receive income from state and private pensions in the future.  The introduction of auto-enrolment into workplace pensions and the continued shift by employers from Defined Benefit to Defined Contribution pensions in the private sector mean that by 2020 there could be 15 million savers in DC pensions, compared to an estimated 5 million today."

"Greater reliance on Defined Contribution pensions in the future will mean that many more individuals will be exposed to the risks of investment performance and will need to convert pension pots into retirement income and engage with the annuity and retirement products market."

"As the first report in this series highlighted, the amount of income needed by pensioners can increase significantly during retirement, especially as health deteriorates and the need for care increases, and yet currently around 90% of annuities purchased are level annuities that do not keep pace with inflation during retirement. Individuals will need to manage all of their income and assets, including state pensions, private pensions, savings, and potentially housing wealth to reach the standard of living they aspire to."

Jasper Berens, Head of UK Retail at J.P. Morgan Asset Management said, "Changes in the pensions landscape mean it will no longer be possible for individuals to stick their head in the sand when it comes to planning for retirement. The report highlights the necessity for individuals to take a greater interest in planning financially for their retirement during their working life. "

"However, the complexity of planning for retirement and the potential opportunity to use more complex combinations of income and assets means individuals will require a greater level of advice.

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