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Defined Contribution

U.K.’s PLSA consults on national retirement targets, need for more saving

The U.K. retirement association is consulting the industry on national retirement targets, which will help plan participants assess if they are on track for the desired retirement, attendees heard at the Pensions and Lifetime Savings Association's annual conference Thursday.

According to research conducted by the PLSA, 77% of the surveyed plan participants did not know how much they will need in retirement. In efforts to change that, the PLSA is looking at introducing national retirement targets, which will define modest to comfortable levels of retirement.

Speaking on the panel, Martin Fahy, CEO of Association of Superannuation Funds of Australia, commented on the Australian retirement market, where ASFA has already developed these standards without the regulator's endorsement. "The presence of these targets means that we can have a conversation on a national level."

"I encourage you to talk about the targets. However, we made two mistakes in Australia in relation to these targets. One was to even define the comfortable standard. The second one was not including house ownership (as a factor) in the conversation about the future of retirement," he said.

Richard Butcher, incoming PLSA chairman, argued during the panel discussion that the scope of automatic enrollment needs to be deepened and this could be done by including additional groups under the national system, particularly the 18- to 21-year-olds and the self-employed. "The level of contribution should go up to 12%," Mr. Butcher said. Currently the combined employer and employeecontribution rates equal 2% and starting in April 2018 it will increase to 5%, finally reaching 8% in April 2019.

But panelists agreed that automatic escalation of contributions on its own its not enough to get plan participants to put away more for retirement. Tim Sharp, policy officer at Trades Union Congress, the umbrella group for trades unions in the U.K., warned that to change people's behavior, the employers may end up having to contribute two-thirds to make up for the difference.

Speakers also said that engagement is key in the process of getting people to save more. Patrick Heath-Lay, CEO of B&CE, provider of the 2 billion ($2.7 billion) multiemployer plan The People's Pension, West Sussex, England, said: "Disclosing information doesn't make people understand the information," he said.

The PLSA is consulting the industry until Jan. 12.