Reliance on UK State Pension Would Dramatically Reduce With Flat Rate Pension
25 October 2012 (PLANSPONSOREurope.com) – A combination of auto-enrolment and state pension reform will see UK retirees’ reliance on private sector pensions, as opposed to the state shift by about 10% of total retirement income.
A report from the Office for National Statistics revealed in 2010/11, income from private pensions accounted for a similar proportion of the average gross income of retired households as the state pension 41% and 38% respectively, with the remaining 9% covered by savings and other investments.
Meanwhile, analysis from actuaries LCP shows auto enrolment is likely to add about £40bn to the total private sector tally, while increasing the state pension to the proposed £140 per week flat rate, will cost approximately £15bn.
But Mark Folwell, partner at LCP, told PLANSPONSOR Europe this shift towards the private sector could be offset by unexpectedly bad investment returns in defined contribution schemes, or a faster than expected reduction in numbers of defined benefit recipients.