How to manage retirement during a cost of living crisis
Confused about your pension? You are not the only one. “People have an average 11 small pots, they don't really know what that means for them in terms of what their retirement income is likely to be,” explained Laura Trott, UK’s Minister for Pensions at a recent evidence hearing by the Work and Pensions Committee examining DWP’s plans to introduce Pensions Dashboards.
And it’s not only UK citizens who don't know what their retirement income is likely to be. The DWP admitted in the same evidence session that there have been underpayments to the tune of £1bn in state pension payouts due to missing information from people’s national insurance records.
Meanwhile, the cost of living in the UK is rising. The latest inflation figures show prices have gone up by 7.9% in June, with food prices increasing by 17.4%, resulting in 57% of households reporting to have struggled to pay for essentials. This state of affairs has dramatically diminished the capability of people to save for their retirement.
During these worrying times of rising prices, people have much more of a need to know what they are likely to have in retirement. Yet at the moment it's very difficult to determine what that will look like. This is particularly relevant for younger generations. How millennials go about saving for a pension has radically changed from when their grandparents dealt with retirement. There is a concern that Generation Y (millennials) is not informed enough about saving for a pension, especially considering it is likely they will on average hold more than ten jobs before they retire.
A different pension approach is needed.
Introducing the (delayed) Pensions Dashboard
The UK Government is focused on the financial wellbeing of people by equipping them to be more financially informed and make the most of their money and pensions. This is why the UK Government has initiated the implementation of the Pensions Dashboard, enabling individuals to find and view their pensions all in one place, bringing more awareness to how much they will need to save in the long term for retirement.
Although the DWP recognises the importance of the Pensions Dashboard, it nevertheless announced a delay to implementation:
“The pensions dashboard will play a really important role in bringing that all together and also allowing people to see this alongside their state pension to get a full picture of what it's going to look like for their retirement,” said pensions minister Laura Trott. “[Yet] it was the issue that we had around the connection process, which was needing more work in terms of the industry and there was insufficient testing in terms of the actual architecture itself. We needed more time to ensure that it was robust.”
The DWP is hoping to have the portal up and running “very soon” and the government body will start the process of writing later this year. This timing, however, has not come soon enough for Jonathan Hawkins, Principal Consultant and Pensions Expert at Bravura. Bravura has been collaborating closely with the Pension Dashboards Programme (PDP), regulators and its industry partners to make sure dashboards are delivered successfully for the good of the industry.
Bravura recently completed a collaboration with MoneyHub at this year’s PASA Annual Conference, at which a fully operational front- and back-end pensions dashboard was showcased for the very first time, demonstrating the tech works. Nonetheless, the pension solution provider is waiting for final guidance from the PDP to continue onboarding clients and build on the work the sizable amount of work the industry has already delivered.
“We are concerned that any further delays in connecting to the CDA will likely eat into the time pensions providers and schemes have to deliver, so it is important the programme comes back online sooner rather than later,” explained Hawkins. “Although June’s announcement played a useful role in tidying up the regulations and legislation around the PDP, we are roughly four months on from the programme reset and we’re still waiting on key guidance on connections and staging deadlines.
“When the guidance is received (which we hope to be over the next few months) there is, of course, a worry that guidance differs in gravity from legislation. It will ultimately be up to the industry to lead by example and to the regulators to ensure appropriate measures are in place to meet the updated timelines.”
In the meantime prices are likely to continue to rise, which puts people more at risk of not putting enough aside for retirement. The Pensions Dashboard is expected to help many, especially the younger generation, in planning for their retirement income in the future. Once it’s ready.
Photo by Breakingpic: https://www.pexels.com/photo/gold-colored-coins-near-calculator-3305/