While Automatic Enrolment has brought more than 10 million additional savers into pension saving, it will be some time before the positive effects of being automatically enrolled throughout working life can be seen. The impact of Pension Freedoms may be more varied as we observe how it develops in years to come. While giving savers greater flexibility when they come to access their savings in retirement, savers are exposed to higher risk when it comes to making decisions about how to access savings. The continued shift from DB to DC has also increased the risk borne by individual savers, as under DB schemes risk was predominantly borne by employers. There are concerns that increased risks, along with low contribution levels, mean that fewer people will be able to achieve adequacy in later life compared to previous generations of retirees.

The question of how to achieve adequacy is not one which has an easy answer, as there are several different measures of adequacy and it can mean different things to different people. However, the UK is currently on course for a quarter of people approaching retirement (those aged between 50 and State Pension age) being unlikely to receive an income that will provide a minimally acceptable standard of living in retirement and nearly half failing to achieve a personally acceptable standard of living. Fewer than 1 in 10 can expect to achieve a comfortable living standard (as described in the Pensions and Lifetime Savings Association’s (PLSA’s) Retirement Living Standards). The risk of not achieving retirement adequacy is even greater for members of certain ‘underpensioned’ groups including women, black, Asian and minority ethnic groups, those who are disabled, carers and the self-employed.

While the pensions landscape has gone through significant evolution already, there will still be many who struggle to achieve adequacy. Joined up approaches are likely to be needed across a broad range of policy areas, including work, housing and health, in order to improve adequacy in retirement across the board, and especially for those in underpensioned groups who are at greater risk of experiencing poor later-life outcomes. Because of the long-term nature of pensions, these changes will need to be implemented as soon as possible in order to improve adequacy for those who are currently some distance from retirement.