Anyone labouring under the misconception that defined contribution pensions will serve the UK’s savers well in retirement, would do well to heed the warnings given in pension consultant LCP’s latest research.
In a paper entitled ‘The ski slope of doom’, LCP warns that ‘current plans to replace disappearing
defined benefit (DB) pensions by new DC savings are wholly inadequate. Without a greater sense of urgency, a whole generation of people will experience a worsening retirement outlook’.
The consultant has analysed the likely pension entitlements of those in the private sector – having
stripped out the expected returns enjoyed by final salary members in the public sector – and the
findings are bleak. The projected income for both men and women falls steadily from around £300 per
week in 2023 to just over £200 by 2046.
LCP argues that the positive news of pension saving via auto-enrolment regularly pushed by government, hide the reality that much of that saving is inadequate and people are stumbling towards a bleak retirement.
For those in the pensions industry, this research comes as no surprise. The demise of DB has been
in action for decades and the DC schemes that have replaced them have always been far less generous
and, given individuals rather that companies bear the investment risk, they are also less stable. This is a major social problem facing the UK in the years ahead, which will exacerbate inequality, but is currently rarely discussed in the ESG world. LCP calls on policymakers to review its evidence
and consider the future for UK retirement saving more honestly.

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