Save more to give yourself a ‘living pension’
Firms are told to set benchmarks
WORKERS need to save more if they are to enjoy a “living pension”, a report warns.
Companies should persuade staff to put aside the right amount for retirement, according to think-tank the Resolution Foundation.
The minimum amount in a so-called living pension is a weekly £209 for a single homeowner, or £445 for a couple in private rented accommodation, it was said.
Individual workers will need to save £3,000 a year to build up the £70,000 pot which would guarantee them this level of pension, the research found.
But a full-time living wage earner only saves half of this, it was said.
The Building A Living Pension report, supported by Aviva, suggests employers now set new pension savings benchmarks for staff.
Success
The review says that workers who only pay in the minimum amounts required under automatic enrolment into their workplace pensions will fall short of the savings needed for a comfortable retirement.
Former pensions minister Sir Steve Webb said: “Automatic enrolment has been a huge success in getting millions more workers started on the savings journey. But it is very much a job half done.
“In particular, current legal minimum contribution rates will not generate a comfortable retirement for most people. Anything which helps employers and employees to realise that they need to go beyond legal minimum savings levels would have to be a good thing.”
The introduction of auto-enrolment in 2013 has led to increases in the number of private pension savers, with almost 10.4 million employees auto-enrolled by November 2020. Employees aged 22 and over and earning more than £10,000 in a job are automatically enrolled into their employer’s scheme. Minimum savings requirements are set by the Government, and consist of an eight per cent contribution. This is made up of three per cent from the employer, four per cent from the employee and an equivalent of one per cent from the Government via tax relief.
Laura Gardiner, director of the Living Wage Foundation, said: “Despite the success of auto-enrolment in spurring a basic level of saving, many lower income workers aren’t building up the pensions necessary to cover essential costs in retirement.
“Responsible employers have a role to play in addressing that challenge, and a new ‘living pension’ standard is a vital tool for supporting and encouraging them to do so.”
The Department for Work and Pensions said: “Helping workers secure greater financial security in retirement must always be a collective effort.”