The prospective assistance provided by the Financial Assistance scheme and the current work of the review into the use of relevant scheme assets should not affect the decisions that trustees take in relation to their scheme funds.
It is not for the Government to offer advice to trustees on whether and when they should purchase annuities. Trustees must act in the best interest of their members and in accordance with scheme rules and their statutory obligations.
No survey work provides information in exactly this form.
The Pensions Commission estimated median desired replacement rates using information on individuals’ current income and on the income individuals considered enough to live on in retirement. In addition the Commission also looked at actual replacement rates and levels of expenditure. Considering the evidence together they concluded that there could be no universal definition of pension adequacy, but used benchmark replacement rates of 80 per cent. of gross earnings for lowest earners, declining to 67 per cent. for median earners and to 50 per cent. for top earners to assess pension adequacy. (See Table 1)1.
1 Pensions Commission (2004), Pensions Challenges and Choice: The First Report of the Pensions Commission, Chapter four.
Earnings Target replacement rate (Gross) (Percentage) Less than £9,500 80 £9,500-£17,499 70 £17, 500-£24, 999 67 £25,000-£39,999 60 £40,000 plus 50 Source: The first report of the Pensions Commission: Pensions, Challenges and Choices, Appendices, p. 169
Target replacement rate (Gross) (Percentage)
Less than £9,500
£17, 500-£24, 999
The first report of the Pensions Commission: Pensions, Challenges and Choices, Appendices, p. 169
Both the Pensions Commission and DWP have estimated the number of people who are saving enough to reach these benchmarks utilising evidence from more than one survey. DWP current estimates indicate that around seven million people are undersaving2.
2 DWP (May 2006), Security in Retirement: towards a new pensions system, Appendix A.