My Lords, having just heard from two fantastic acknowledged experts on this issue, I shall be much more general and very brief. We ought to start by looking at the total lack of knowledge of financial services that the general population in this country have. They have no idea how long they are going to live or about what their savings are going
to provide for them when they retire. There are worries at the moment as well about what will happen to our economy in the shorter term.
I congratulate the Government and their predecessor on introducing auto-enrolment, which is a great success. However, I share the worries that have been put forward about these being early days and we cannot really estimate at the moment quite what the benefits are.
The International Longevity Centre UK, which I am privileged to head up, recently published a report called Consensus Revisited. It elaborates on the ignorance that the general public have, saying that even with the planned changes to state pension age, people will still require sufficient savings to fund up to one-third of their adult lives in retirement, which is over 20 years. In 2012, women left the workforce at 63 while men left slightly later, which means that men are going to fund 21 years in retirement and women 26, which is a long time. I do not think the public really understand that or have grasped those figures.
In future, therefore, adequate retirement income will hinge on people saving enough through defined contribution schemes, but as yet we know that is not the case. Projections suggest that unless contributions into DC schemes rise, fewer than half of median earners will be able to secure an adequate retirement through auto-enrolment. On average, employees contribute just 2.9% of their salary to a DC pot, whereas members of defined benefit schemes put in 5.9%, so there is a big difference. The difference in the employer contribution is even starker: just over 6% for DC schemes but over 15% for DB schemes. So there is still quite a lot of worry, and there are many things to sort out before we get this right. Given the lack of knowledge about longevity and what the two previous speakers have so wisely said, I agree that we must be careful with the LISA because it could be a threat to pensions, damage pension saving and, at any rate, cause quite a lot of confusion.
I was privileged to attend a meeting of experts, who all agreed that we need to promote pensions and explain them much better. I hope the Government have plans to engage in that. User-friendly communications, more education and much more engagement are essential.
The other thing we ought to note is that there is quite a lot of feeling that more employer engagement is necessary. It is important to ensure that employers become more involved in pension provision and get engaged in retirement savings for their staff. I do a lot of work with Business in the Community, as I know the Minister has done for many years, and I have chaired the CSR All-Party Group for years and now do so jointly with a Member of the Commons. Perhaps through that we can do more to promote the best of this. At the moment, though, it is important that we wait and look again at the LISA threat. I agree with the noble Baronesses about its dangers. Perhaps there is a chance to look again in some detail at what we are discussing.
6.10 pm