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16 Oct 2017

Savers need retirement income targets, report says

Pension targets could help savers understand how much they need to save for a decent retirement income, according to a new report.

National retirement income targets are already used successfully in Australia. Such targets provide savers with tangible income goals which take into account what they need to save in order to achieve different standards of living in retirement (minimum, modest and comfortable), the Pensions and Lifetime Savings Association (PLSA) explained.

According a survey carried out for the trade association, 78% of people in the UK aged between 18 and 64 do not know how to tell whether they are on track with their retirement savings.

Only 16% said they know how much they would need in order to achieve the standard of living they hope for in retirement.

Retirement income targets would address one of the key challenges facing savers as there is currently no widely accepted and generally understood target for retirement income, the PLSA pointed out.

The organisation is also looking at how savers can be helped to reach their retirement income target, for example by bringing more people into the scope of automatic enrolment, changing the current system of tax relief, supporting realistic extensions to working lives, and helping people turn their property wealth into retirement income.

Graham Vidler, director of external affairs at the PLSA, said: “We all know we need to save for retirement but few of us know how much we might need to live on or whether we are on track to hit that target. The PLSA will be consulting widely to understand how the industry and Government can help people build and reach a retirement plan.

“As part of this, we are asking difficult questions which need to be answered to help more people make the right choices around retirement. We are also looking to develop a new set of retirement income targets that will empower savers by providing tangible targets for them to achieve. We look forward to working closely with stakeholders to build a retirement savings market which is truly focused on the end users — savers.”

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