Wealth of Advice, Swale House, Mandale Business Park, Durham, DH1 1TH
The UK could be walking towards a "pension cliff edge", Mercer has warned, encouraging the government to "seize the opportunity" and step back in order to solve the issue holistically.
The firm’s report, a Road Map for Pensions and Long-term Savings, identified three main challenges facing the pensions industry: low standards of living for retirees, low productivity of long-term savings and the need to increase saver engagement.
It argued that UK has a "stark" pension problem, particularly when compared to other countries, with the UK ranking 13th out of 47 in Mercer's latest Global Pensions Index.
With the estimated pension gap set to rise from £6trn to £25trn by 2050, Mercer warned that without urgent reform the UK will not be able to close this gap.
The report also highlighted gender and generational gaps, noting that only 3 per cent of millennial households with median income are projected to meet a "moderate" standard of living in retirement.
However, Mercer suggested that the current pensions review provides the "perfect first step" in helping close the gap, urging policymakers to "seize this opportunity and step back to look at solving this issue holistically to consider auto-enrolment, making assets more productive, the future of the triple lock, how we can make it easier to engage in the work force".
In particular, Mercer encouraged the government to speed up the expansion of auto-enrolment and increasing minimum statutory contribution levels to improve standards of living in retirement and support UK economic growth, suggesting 12 per cent as a target amount, which could boost pension contributions by £10bn annually.
Mercer also encouraged the pensions industry to explore the use of innovations in AI and for the government’s pensions review to evaluate the current state pension, including the triple lock measure.
Mercer UK’s head of wealth, Phil Parkinson, said, “We are slowly walking towards a cliff edge of challenges for pensions and long-term savings, but we have an opportunity to address these.
"The cost of inaction now is likely to be borne by future generations. We are encouraged by the steps taken by the new government and welcome the pensions review. We now need to move quickly.
“To ensure people have a comfortable retirement, the government needs to expand auto-enrolment, address inequalities, and support productive asset investment to ensure everyone can enjoy a secure and comfortable retirement.”
If you want a better view of what your future could be, we'll have a chat over a cup of coffee in our Durham office and work out if we can add any value to your financial picture.
Wealth of Advice are authorised and regulated by the Financial Conduct Authority, reference number 563909. This website is for information purposes only and is not personal advice.
We are committed to providing products and service of the very highest standards. If you feel that we haven't lived up to your expectations in any way, however, we would like to know so we can put things right for you. If you have a complaint, make sure you contact us directly. Accordingly, we will do all we can to resolve your complaint by the end of the next business day. However, if we can't do this, we will write to you within five working days to tell you what we have done to resolve the problem, or acknowledge your complaint and let you know when you can expect a full response. Furthermore, if we haven't issued our response within eight weeks from the date you first raised your complaint, or if you're dissatisfied with our response, you can ask the Financial Ombudsman Service - www.financial-ombudsman.org.uk - for an independent review. The Financial Ombudsman Service will only consider your complaint once you've tried to resolve it with us, so please take up your concerns with us first and we'll do all we can to help.
Wealth of Advice Ltd is a company registered in England and Wales, company number 07709624.
VAT Number: GB131946515