State pension reform may see everyone achieve at least £10,900 a year – ‘prevents poverty'


The Pension and Lifetime Savings Association has released a five step report with recommendations it states will better a median earner’s pension by £4,000 by retirement. The ‘Five Steps to Better Pensions’ report looks at numerous issues, but its analysis of the state pension is stark. 

The report highlighted findings from the Pension Commission regarding the type of income older people should secure.

The Commission stated the UK system should aim to support someone on median earnings to achieve a combined state pension and workplace pension of between 60 and 70 percent of their pre-retirement income. 

However, the PLSA states of the working population currently saving into a pension, 59 percent of households will not achieve their target replacement rates.

As a result, millions of households are potentially facing a substantial drop in their income when they retire.

The organisation states “regular review of the state pension age” must occur in order to keep an eye on retirement income.

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The PLSA also argued: “It is important the state pension ensures, at a macro level, that no one is at risk of poverty in retirement.

“The definition of poverty used is set at a point clearly above the ‘destitution’ level – currently approximately £8,000 a year – but below the relative poverty level, currently approximately £20,000 a year.

“We argue this level should be equivalent to the Minimum Retirement Living Standard for each individual, currently equivalent to £10,900 per annum.

“The new state pension, at £9,628 per year, is currently approximately 15 percent short of our proposed new poverty avoiding level.”

The organisation acknowledges a change to meet this standard will involve gradually increasing costs.

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However, it has described these as necessary within an “ageing society” going forward.

The PLSA also supports the triple lock, suggesting it will “gradually reach this higher level if retained for a number of years”.

While the group believes the current state pension “goes a long way” in helping to protect Britons against poverty, “it needs to go further”.

It has been suggested increases to the state pension would improve retirement outcomes, even for those unable to make their own savings. 

A rise to the state pension would also address retirement inadequacy, regardless of a person’s income, work history or caring responsibilities, the PLSA added.

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The PLSA’s report also outlined four other key recommendations for reform.

Firstly, it touched upon the creation of so-called national objectives for the UK pension system, calling these “adequate, affordable and fair”.

It has been said creating these objectives will help to keep the system on track to achieve goals.

The PLSA also wishes to see reform of the auto-enrolment system to include more people such as younger individuals, and gig economy workers.

Another recommendation is to provide help to traditionally under-pensioned groups including women and the self-employed.

Finally, the group has called for industry initiatives to help people achieve better pensions.

Emma Douglas, Chair of the PLSA and Director of Workplace at Aviva, said: “The PLSA’s recommendations – Five Steps to Better Pensions – will help form a new national consensus on how best to build upon a decade of automatic enrolment success so everyone can achieve the right income in retirement.

“The combined successful implementation of these recommendations could make a huge difference to the retirement income of today’s savers. An annual increase of almost £4,000, or 25 percent for median earners, is particularly significant.

“Now, in the middle of a cost-of-living crisis, is not the time for radical change but by providing a clear ‘roadmap’ for reforms, government will give employers and pension savers time to plan, which will help to ensure better retirements.” has contacted the Department for Work and Pensions (DWP) for comment. 


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