National retirement income targets are needed to help savers understand whether they are putting away enough money for old age, the Pensions and Lifetime Savings Association (PLSA) suggests.
With more than three-quarters (77%) reporting to the trade body that they do not know how much they need in later life, the trade body said national targets could provide more "tangible" aims for savers, boosting retirement income.
Four in five of the 1,600 individuals aged 18 to state pension age surveyed by the trade body said such targets would help them plan better for retirement.
The PLSA has now launched a consultation to gauge views on how such targets would be adopted, what level they should be set at, and if there should be varying levels depending on socio-economic factors.
The organisation argued "simple targets, presented in straightforward pounds and pence, could help [savers] get on top of their saving needs", and is now seeking industry views on how much would be enough.
PLSA director of external affairs Graham Vidler said setting such targets could empower savers.
"We all know we need to save for retirement but few of us know how much we might need to live on or whether we are on track to hit target," he said. "The PLSA will be consulting widely to understand how the industry and government can help build and reach a retirement plan.
"As part of this, we are asking difficult questions which need to be answered to help more people make the right choices around retirement. We are also looking to develop a new set of retirement income targets that will empower savers by providing tangible targets for them to achieve.
"We look forward to working closely with stakeholders to build a retirement savings market which is truly focused on the end users - savers."
Such a proposal would mimic the Australian Retirement Standard, which uses a three-tier system to provide targets for a ‘comfortable', ‘modest', or state pension-only provision.
The system uses budget benchmarks for each category, including a potential basket of goods, to suggest the necessary income for an individual or a couple, which are updated quarterly. For example, an individual might need an annual income of A$24,270 (£14,193) at age 65 for a modest lifestyle, while a couple could require A$34,911 (£20,416).
The People's Pension director of policy Darren Philp welcomed the suggestions.
"At a time when almost 14 million workers are at high risk of not having enough to live on in retirement, we should be doing everything possible to help people plan ahead," he said. "Any clarity that can help people think about what they might need to save for a decent retirement in decades' time can only be a good thing.
"We need a simple target that brings retirement savings to life for people."
Hargreaves Lansdown head of policy Tom McPhail added such targets are important in a "post-paternalistic paradigm" where savers bear the onus for their retirement income.
"The key intervention needed to reset the whole framework for investors is for the government to champion a clear policy around promoting saving and investing," he said. "No-one in government, no department, and no policy has anything to say about wanting to create a nation of savers and investors.
"The proposal to target an income based on the concepts of ‘minimum', ‘modest', and ‘comfortable' may well work for investors. We'd see this working most effectively if incorporated into retirement income calculators."
The consultation also argued that contributions under auto-enrolment (AE) need to rise to 12% of salary over the course of the next decade, while the scope of the programme needs to be broadened to the self-employed, gig economy workers, and those with multiple jobs earning over £10,000 a year who are currently ineligible.
It also stated employers and the pensions industry need to develop a set of principles in order to support people working for longer, such as making it easier for older employees to work part-time or reskill.
The PLSA's consultation - which will be accompanied by a series of roundtable events, engagement with government, and deeper analysis - closes on 12 January 2018.
Phoenix Group will launch an ESG defined contribution (DC) default solution for pension fund clients of its Standard Life Assurance business and their scheme members.
Newton’s Curt Custard considers the investment outlook for 2021 and the implications for DC schemes
Master trusts’ investment strategies have grown and become more sophisticated over the last three years, but “growing pains” are hindering progress, according to the Defined Contribution Investment Forum (DCIF).
More than half of BlackRock’s flagship UK defined contribution (DC) default fund’s assets will be invested in ESG strategies by June 2021.