Pension holders are likely to experience further problems with their schemes, according to Prudential. “I think we are slightly living on borrowed time and pensioners’ incomes are going to be a big problem in ten years time,” said panellist and head of pensions research at Hargreaves Lansdown, Tom McPhail.
An expert panel has pinpointed three major issues that are said to be contributing to the “crisis”.
The first is a decline in occupational pensions which pay up to two-thirds of final salary. The second is that the “baby boomer” generation - those aged between 50 and 65 - are cashing in on housing equity to pay off debts and to help out their children, chipping away at potential retirement income reserves.
Thirdly, young employees are struggling to pay back student debts and to get on the property ladder, and this is reducing available funds for pension payments.
The panel, comprising IFAs, industry product providers and retirement experts, is urging the government to cooperate more effectively with the financial services industry in order to improve the worsening situation.
It has suggested several practical ideas to improve the situation. One is to simplify the convoluted and jargon-filled information about pensions, which can cause confusion, and even indifference, among consumers.
Panellist and managing director at Annuity Direct, Stuart Bayliss, commented: “Recommendations produced by IFAs have to be at least 12 pages long. Nobody reads that.”
The panel also emphasised a need for better financial advice, particularly for lower income groups. It also suggests that asset/wealth wrappers could encourage financial planning as customers would be able to evaluate the spread of wealth across all the different asset classes. Customers should also be made aware of the effects of inflation on retirement income so that they are more equipped to make financial judgements.
Another panel member and regional director of intermediary sales at Prudential, Steve Lewis, stated: “My main concern is that the only point people take advice is at the point of retirement when advice should be taken long before that.”
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