Marvin OnumonuHymans Robertson has published a paper called ‘Falling into a retirement adequacy crisis’, as part of its pensions adequacy project, finding that the shift to defined contribution (DC) has led to a drop in retirement outcomes across generations.
The research looked at the expected retirement outcomes of five generations and tracked how pensions have changed over the years.
As more defined benefit (DB) schemes have closed and DC schemes have become the norm, the responsibility for managing risks has shifted onto individuals rather than employers.
It also revealed a wide gap in pension savings between generations, which could get worse if nothing is done.
Mark Stansfield, actuarial consultant at Hymans Robertson, said: “The move away from DB to DC pensions has transformed the retirement landscape over the last few decades.
“Where once there was predictability and security, there is now volatility and risk, with the burden of decision-making placed on individuals who may not have the tools or knowledge to navigate it.”
Leonard Bowman, head of corporate consulting at Hymans Robertson, said: “The shift has created a landscape where retirement outcomes are less certain, leading to real concerns for retirement outcomes and adequacy for many individuals.
“The issues, highlighted in our paper, run the real risk of de-railing UK companies’ strategies over the coming years as the next generation reaches retirement and these inadequacy issues become a reality.
“Combined with any future government policy proposals, companies could easily find themselves on the back foot.”
Bowman added: “To avoid this, we are calling for a fundamental change in approach.
“Companies need the tools, insights and solutions to align their long-term workforce strategy with emerging retirement risks and be well placed to respond to evolving government pension policy.
“This will be the purpose of our pensions adequacy project.”
