The financial services sector must “embrace reforms” as Britain tackles a £9 trillion retirement savings deficit, the Chartered Insurance Institute (CII) says.
A report from the institute, published on Monday, suggests the average pensioner’s savings will fall short of what is required to adequately cope with day to day living expenses and the costs of long-term care.
The £9 trillion deficit figure, which equates to an average annual shortfall of £16,700 per person, assumes pensioners retiring over the next 40 years achieve the current average retirement income, all have debts to pay down and one in four need long-term care.
However, the CII says there are “significant barriers” to long term saving in Britain, including complexity surrounding the UK’s tax system, trust issues owing to mis-selling scandals and uncertainties about the future, and a low level of knowledge about the scale of the challenge that will face individuals entering retirement.
David Thomson, the director of policy and public affairs at the CII, says: “It’s clear the scale of the problem is massive, but not insurmountable.
“The financial services sector must shoulder its responsibility and embrace reforms in legislation aimed at improving the standards of living and levels of trust in financial products and providers.
“Equally, these reforms must be communicated.”
Thomson also urged cross-party collaboration “to provide the public with certainty” around future rules.
In a contribution to the report, Steve Webb, the pensions minister, says: “The next generation face a different world, with increasing life expectancy, the decline in final salary schemes and lower annuity rates. They are going to have to take greater personal responsibility for their retirement.”