Boost contributions at key stages in life, pension savers urged

Pension savers should be nudged to increase their contributions at key life stages as they grow older, such as when they get a pay rise, when their children leave home, or when they have paid off their mortgage, an economic thinktank has urged.

Automatic enrolment into workplace pensions does not encourage contribution rates that increase with age, the Institute for Fiscal Studies (IFS) said.

But it argued the focus should be on policies that increase retirement saving at the best time in people’s lives.

There are good reasons why the proportion of earnings set aside for retirement should increase substantially through working life for many people, IFS said.

It added that many employees experience earnings growth over their lifetimes and would, therefore, prefer to save more at older ages when earnings are higher.

Parents would also be expected to save more for retirement after their children have left home and expenses are lower.

IFS said policies that should be considered include default employee contribution rates that rise with age and increases in employee contribution rates that are triggered by earnings increases.

There could also be nudges to encourage people to increase their pension saving when their children leave home, or when they finish debt repayments such as student loans or mortgages, IFS said.

The research is part of an ongoing programme of work funded by the Nuffield Foundation.