At our ‘How much is enough? ’conference in June 2016, Dr Bonnie-Jeanne Macdonald introduced the Living Standards Replacement Ratio (LSRR). This is a new mechanism for calculating retirement income adequacy.
The idea, as set out in this Investments and Pensions Europe piece, is that people should have as much to spend on their lifestyles as they did before they retired. Bonnie-Jeanne found that the standard benchmark replacement rate of 70% is largely untested and that income in a single year does not reflect an individual’s standard of living. The LRSS takes into account household make-up and needs, partner income and levels of debt. The result is a potentially more accurate and consistent measure of retirement income adequacy.
You can read the full paper, ‘How accurately does 70% final employment earnings replacement measure retirement income (in)adequacy? Introducing the Living Standards Replacement Rate (LSRR)’, here.
