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What level of pension contribution is needed to obtain an adequate retirement income?

Redwood, Daniel, Carrera, Leandro N., Armstrong, John and Pennanen, Teemu (2013) What level of pension contribution is needed to obtain an adequate retirement income? Pensions Policy Institute, London, UK. ISBN 9781906284275

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Abstract

Under automatic enrolment, employers are required to automatically enrol their employees into a qualifying pension scheme. The minimum total contribution rate is 8% of a band of earnings from £5,668 and £41,450 per annum, of which a minimum 3% must come from the employer. With over 80% of Defined Benefit (DB) schemes now closed to new members or future accruals the majority of employers are expected to select a Defined Contribution (DC) pension as their qualifying scheme. This report analyses what ranges of retirement incomes from a DC pension different individuals might achieve by making only the minimum required level of contributions. The report also analyses the contribution rate necessary for different individuals to have a “good chance” of achieving an adequate retirement income. This report employs outputs from the PPI Individual Model adapted to use stochastic modelling techniques, based on a model developed by the Department of Mathematics at King’s College London. Each individual modelled is run 100,000 times with different economic scenarios. This illustrates better the variability around investment returns and economic variables year on year.

Item Type: Monograph (Report)
Official URL: https://www.pensionspolicyinstitute.org.uk/
Additional Information: © 2013 Pensions Policy Institute
Library of Congress subject classification: H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
J Political Science > JN Political institutions (Europe) > JN101 Great Britain
Sets: Research centres and groups > LSE Public Policy Group
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Funders: Association of British Insurers, Defined Contribution Investment Forum, Department of Work and Pensions, Institute and Faculty of Actuaries, B&CE, Prudential, Legal & General
Date Deposited: 08 Nov 2013 12:30
URL: http://eprints.lse.ac.uk/54233/

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