UK policymakers should reconsider the definition of pension adequacy and look to successful international examples for improved retirement outcomes, Festina Finance has suggested, emphasising that the UK’s pension adequacy requires a “structural reset".

The firm said that the Pensions Commission’s recent revival, aimed at addressing the second phase of the pension review and its focus on adequacy, presents an "opportunity" for policymakers to consider more comprehensive structural solutions and think more broadly.

Festina Finance UK country head, Daniel McLaughlin, said: “If we’re serious about adequacy, the conversation needs to be bigger than whether 12 per cent contributions are enough; we need to stop tweaking and start transforming.”

McLaughlin emphasised that it is “really encouraging” to see the long-term and structural scope of the Pensions Commission, which will give the commission the ability to think about these structural and systemic issues.

The firm also noted that other countries have shown what is possible when retirement systems are designed with outcomes in mind.

Indeed, McLaughlin pointed out that in countries high on the Mercer Index, contribution rates exceed 20 per cent, coverage typically sits above 90 per cent, and average earners retire with replacement rates of 70–85 per cent and up to 100 per cent for lower earners.

He argued that these outcomes are the result of “intentional design” and haven’t happened by chance, and include “strong policy frameworks, a strong digital infrastructure, collective agreements and, crucially, a shared national commitment to adequate retirement income”.

“These systems don’t just enrol people; they ensure outcomes are meaningful,” he added.

McLaughlin said that a “key” lesson learnt from these countries is to move focus to generating income instead of building pension pots.

“In some European systems, the mindset is different. People save with income in mind from day one, and not just to accumulate capital,” he said.

“That subtle shift in framing leads to better decision-making throughout the retirement journey. As an industry, we have the collective responsibility to encourage this shift toward income.”

Additionally, he noted that adequacy goes beyond pensions alone, offering an example of vulnerable citizens in receipt of the equivalent of the state pension, in some parts of Europe, who are automatically assessed for housing benefit through a digital system.

He said that this is “integrated, efficient, and dignified” and “what adequacy should look like for people in practice”.

“The UK has a proud record of pioneering auto-enrolment. Now we need to raise the bar,” McLaughlin said.

“We must redefine what adequacy really means, design with outcomes in mind, and build a system that delivers a dignified retirement outcome, not just savings, for all. Adequacy in the UK needs a structural reset, and not just another percentage point.”

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