The winning entry in the Association of Consulting Actuaries’ essay competition for students and recent graduates argues that UK pensions policy is optimising the wrong variable, saying a single adequacy figure fails to capture some of the risks individuals face.  

At Tuesday's Bloomfield Lecture, held in honour of the late ACA chair Patrick Bloomfield, recent graduate Pranit Nardekar presented his winning essay, ‘The adequacy mirage: why UK pensions policy is optimising the wrong variable’.  

Introducing the hypothetical saver 'Sarah' – auto-enrolled with an uninterrupted 45-year career on a middle income – Nardekar highlighted how the adequacy measures used by the pensions industry, including the Retirement Living Standards, fail to account for rental costs, possible care costs and health inequalities.  

"If the target is wrong, every reform calibrated to it inherits the error. Fix the measurement first and then calibrate," he said.  

He therefore proposed a 'retirement adequacy dashboard', where adequacy can be looked at from four different angles, factoring in the key risks.  

Three runners up then presented their ideas to the assembled actuarial and pensions community. In his essay titled, ‘It’s time to add flexibility to pensions’, Joshua Lufakalyo looked at savings systems in Singapore, as well as Australia, New Zealand and Canada, to argue that UK pensions should not consider retirement in isolation but link it to housing costs and short-term financial outgoings, offering greater flexibility. However, he also had a warning suggesting the UK should not follow the example of Chile, where flexibility resulted in many savers depleting their accounts for immediate consumption. 

Eloghosa Jeffery Godwin also took an international approach in his essay ‘Improving pension adequacy and engagement in the UK: a comparative and strategic analysis’. His proposals were to raise minimum contributions to 12%, ‘sidecar’ savings for the self-employed and to improve default retirement income options through collective arrangements that pool longevity risk.  

Godwin said what struck him most about the UK pension system was the fact employees contribute more than employers under minimum auto-enrolment contributions, an international anomaly. Noting that in Nigeria, employers pay 10% and employees 8%, he suggested the UK should be able to raise contributions too. 

Lastly, Elliott Langstaffe, in his final year at Nottingham University, presented ‘From retirement saving to lifetime financial security’, in which he proposed an Easy Lifetime Savings Account, or ELSA. Under this approach, savings would first flow into emergency savings before tipping into a medium-term account for home ownership or retraining, before falling into a retirement pot. 

Congratulating the winner and runners up, ACA chair Chintan Gandhi said: “As the ACA celebrates its 75th anniversary, we want to look beyond past achievements to the ideas and people who will shape the future of pensions. I have been very encouraged by the quality and originality of thinking across all the essays submitted. They give me real confidence in the next generation’s interest in pensions and reinforce the valuable contribution that actuaries can make in tackling society’s long-term financial challenges."  

As the winner, Nardekar takes home a cash prize of £3,000. The runners up were each awarded £1,500 for their entries.