A new report from Bravura warns that the government and pensions industry risk undoing the good work of AE, unless policy and products evolve to meet the needs of future generations.
It points out that more flexible working patterns are less suited to the “nudge” principles that have helped establish AE. At the same time the pensions industry is already under stress from the twin factors of a declining working age population and increased longevity.
Bravura retirement specialist Natanje Holt, says: “The myopic nature of governmental politics means that short-term interests often prevail at the expense of real (and brave) long-term solutions, to plug the retirement savings gap.
“Without a radical approach, short-term bias will see policy makers nudge difficult, thorny pension problems a little further down the road.”
To ensure a savings culture in the UK is maintained, the white paper highlights some of the key challenges to overcome. These include increasing consumer engagement with pensions and the advice process, as well as increasing savings and pension provision among the self-employed and gig workers – who currently sit outside AE.
It also said that one challenge for the industry is to embrace digital innovation.
The report says: “With the life and pension sector traditionally hampered by legacy systems and a mindset focused on managing risk rather than digital innovation, the need for continuous technology investment, in partnership with a progressive pensions policy, is needed to secure better retirement outcomes.”
Holt adds: “The worry is that the green shoots of a long-term savings culture nurtured by nudging might fade away unless we solve the engagement issue.”