Stuart Southall recently wrote to The Times regarding pension adequacy, automatic enrolment and pension contribution rates. The letter was published in the national newspaper on Friday 21 April.
“Sir, You report (Apr 20) that the Institute for Fiscal Studies has enlisted Lord Darling of Roulanish and David Gauke to take a fresh look at pension policy to try to head off a looming crisis. The IFS is right to be concerned, given the demise of defined benefit pension schemes in the private sector, and given that pension saving is now largely voluntary. A broadbrush, but useful, actuarial rule of thumb is that to save for an adequate pension you should contribute at about 50 per cent of the age at which you start. So someone entering the workforce at age 20 should look to consistently save 10 per cent of earnings, but anyone putting it off until age 50 will have to pay 25 per cent.
With auto-enrolment contribution rates set too low and with an employee option to opt out, many will save nowhere near enough. And, compared with the heyday of defined benefit provision, many savers must now repay student debt and grapple with the inflated costs of property. Pensions have often been regarded as deferred pay, but we may be heading for a time when they give rise to deferred pain.”