Success of pension freedoms depends on bold policy | KPMG | UK

Success of pension freedoms depends on bold policy and innovation, according to KPMG

Success of pension freedoms depends on bold policy

Unless the UK’s savings gap is addressed, there are some for whom the new pension freedoms will offer little freedom at all.


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  • Addressing the savings gap and Britain’s savings culture are highlighted as the biggest challenges to pensions policy and the ultimate success of the pension freedoms
  • Auto enrolment must be more prescriptive and attractive to make a real difference
  • Providers must innovate, and become more customer centric in order to survive industry disruption

Unless the UK’s savings gap is addressed, there are some for whom the new pension freedoms will offer little freedom at all.

That’s the conclusion made in the second report (link) into pension freedoms produced by KPMG based on research supported by the Association of British Insurers (ABI), which urges industry stakeholders to come up with a clear strategy to address ‘pitifully low’ levels of retirement income.

According to KPMG, there are two key policy levers; auto enrolment and tax incentives.

While auto enrolment is welcomed, its success will not be ensured until contribution levels are consistent with the retirement income people aspire to, Interventions could include extending its coverage to the self-employed and low & variable paid, auto-escalation, increased contributions or even compulsion.

Alongside a more prescriptive AE system, the report calls for improving the effectiveness of the current incentives for pension accumulation.

Andy Masters, UK head of savings and wealth management at KPMG, commented: “While we welcome pension freedoms, policymakers must now focus on Britain’s savings deficit. They must be bold enough to galvanise savings in ways that materially increase average retirement pots.”

Drawing on interviews with more than 40 industry figures and policymakers, the report also warns that most consumers are neither sufficiently engaged nor capable of taking responsibility for making pension freedom decisions.

The report identifies low levels of financial literacy and “decades of a paternalistic pensions culture” as barriers to raising capability and engagement, and it warns that shifting responsibility from the state, to savers is “unlikely to take less than a generation.”

However, new disruptive technologies are identified as ways to engage consumers. Face-to-face and bespoke advice will continue to be delivered, but increasingly through digital channels, which will be so commonplace that people will no longer refer to ‘robo advice’ – it will be thought of simply as ‘advice.

’Masters continued: “It’s overdue, but Britain’s saving culture needs a sea change. With the UK savings ratio halving since 2012, millennials face the prospect of having little saved and no house to their name by the time they are middle aged. Policymakers need to ensure auto enrolment becomes a success, while doing their part to encourage engagement and financial literacy. Pension providers must deliver innovative solutions which provide tailored advice to a wider range of customers. Otherwise Middle Britain may struggle to cash in on the new freedoms.”

While pension freedom has “made life more complicated for retirees”, according to the report this is “doubly true for pension firms.”

Technological and policy disruption is being compounded by a convergence between retail and wholesale value chains, as corporates – as well as individuals – increasingly require advice. Above all else, the report suggests “customer centricity” will decide the winners during this period of transition.

Masters added: “The freedoms throw the gauntlet down to the pensions industry. The onus is on firms to modernise infrastructure to support flexible, multi-channel propositions that will soon become ubiquitous. Yet keeping up with the times is not enough, the industry must now transition to a consumer centric model – putting the customer at the heart of everything they do.

“Amid this disruption, there will be winners and losers. Consolidation is inevitable and within five years we expect the retail market to be dominated by fewer firms focused on a simpler, customer centric model.”

Yvonne Braun, Director of long-term savings policy at the ABI, commented: "The pension freedoms revolutionised the world of retirement income - now we must ensure as many people as possible can make the most of them.

“Giving individuals greater power over their pension pots should encourage more people to put money aside for their retirement, but this alone will not drive the levels of engagement we need. Education is key in the long term, and the industry is already looking at the part it can play by standardising and simplifying the language used to talk about pensions and long-term savings.

“Throughout their working lives, people should have easy access to information about their pension saving so they can keep track of how well prepared they are for retirement. The industry is keen to support the development of a pensions dashboard which would make this possible – this requires a partnership with Government and an over-arching strategy for delivery.”


The report is available at

Notes to editors:

For further information and interviews please contact:

Erfan Hussain

T: +44 (0)20 7694 4208

M: 0776 804 3447


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About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff.  The UK firm recorded a revenue of £1.96 billion in the year ended September 2015. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 174,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such. 

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