Replacement Rates in Pensim2. Stewart Butler Pensim2 Team Model Development Unit Department for Work and Pensions. Introduction. Background: UK Pension System What are replacement rates? Previous UK work What Pensim2 offers us What matters? Income Relativity Adequacy
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Model Development Unit
Department for Work and Pensions
Replacement rate = Retirement Income
If replacement rate < threshold then undersaving = 1
Assumed everyone started contributing at age 30 and continued until retirement
Survey dataset of individuals aged 50
Limiting assumptions on how people continued in work and contributed to pension schemes
Here we will chart the corresponding ‘undersavers’
Thresholds (of gross income):
67% Median Income
And not just working age income….
And the corresponding number of undersavers….
Threshold adjusted for inflation:
Threshold adjusted for earnings:
Hmm, I think I’d like a new car for my retirement…
My son’s car
My old carWhat Matters? Relativity
Results are presented relative to the number of undersavers under the price threshold in 2006