New pension research: ISA assets soar while pensions slide

Dated: 20 April 2012

New Pension Research

  • Faith dwindling in pensions
  • ISA assets soar while pension contributions slide

New research published by the Institute of Directors (IoD), in association with Lucida, reveals that the UK’s failing pension architecture is leading millions to abandon pension saving entirely, preferring to trust other vehicles such as ISAs.

The trend is illustrated by the fact that the amounts paid into ISAs increases sizeably year on year, rising from £35.7 billion in 2007, to £43.9 billion in 2009/10, while employee and individual pension contributions peaked in 2007 at £25.6 billion, and fell to £22.9 billion by 2009. This means the population choose to pay almost twice as much into ISAs as into pensions, making clear which savings vehicle they prefer.

This trend seems set to continue or even accelerate, with payments into ISAs jumping by almost £10 billion to a total of £53.8 billion in 2010/11. The authors propose a new approach to pensions better suited to 21st century demographics, working practices and savings behaviour.

The report, “Roadmap for Retirement Reform”, written by IoD pensions expert Malcolm Small, explores the scale of the challenge posed by an ageing population, a society habitually dependent on debt, low savings rates and high numbers of people with little or no pension provision. The key proposals put forward to address this crisis are:

  • Raise the state retirement age to 70 sooner than is currently planned – by raising the age to 68 in 2032, 69 in 2038 and 70 in 2044. The Government currently plans to raise the retirement age to 68 in 2046.
  • Provide a single, flat-rate, universal, basic state pension, abolishing means-tested retirement income benefits such as Pension Credit
  • Radically reform and simplify the pension architecture, which has become hugely complex, unattractive and enmeshed in a forest of regulation
  • Develop a formal UK Government savings policy – the Government currently has no over-arching policy to encourage savings, despite the stark lessons in recent years on the danger of over-indebtedness

To download the full report, click here.

Malcolm Small, Senior Adviser on Pensions Policy at the Institute of Directors and author of the new report, said:

“Traditional pensions are now outdated and increasingly unattractive. Society has changed but pension provision and Government policy have failed to keep up with the new challenge we face. The fact that so many people are either not saving at all for retirement or moving to other investment vehicles such as ISAs is a stark illustration that the current architecture has lost public confidence. If we are to avoid millions of people facing poverty in old age, then we need to give them an attractive structure to save into, not simply order them to save. A simpler system, a higher state retirement age and a proper savings policy would at least provide the foundations for a new retirement savings architecture. We cannot go on like this, and if nothing is done then people will continue to walk away from pension saving.”

Margaret Snowdon, OBE, Operations Director of Lucida said:

“Lucida welcomes this seminal research by the Institute of Directors.  We supported the IoD’s initial work in 2009, as we felt strongly that people need help to save for retirement; less than three years later, the need for positive action is even greater. From our focus on the DB de-risking market, we know that people are living longer, move jobs more frequently, retire in different more flexible ways, rely on pension providers for their income in retirement, but know very little about pensions – and the members we deal with are the lucky ones who have had the benefit of a DB scheme for a significant portion of their working lives.  Later retirement and auto enrolment are steps in the right direction, but without significant change, the retirement landscape 20 years from now will be bleak.”

The full report is available online here:

Data for the amounts paid into ISAs is drawn from HMRC data ( and pension contribution data is drawn from the ONS Table 8.13 – (–pension-contributions–2011-edition-/index.html)



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Edwin Morgan
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Institute of Directors, 116 Pall Mall, London SW1Y 5ED
Tel: +44 (0)20 7451 3392
Mob: +44 (0)7814 386 243

Notes to editors

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