A DWP research report published today shows that 11.9m people of working age in the UK are failing to save enough for retirement but many only need make modest changes to safeguard their financial future. Commenting on the report, Malcolm McLean, senior consultant, Barnett Waddingham, says:
“The report underlines the important role auto-enrolment has played and will continue to play in encouraging pension saving but appears to recognise, as most of us do, that the minimum specified contribution levels (8% of attributable earnings) are inadequate and will not deliver the sort of returns needed for a comfortable retirement for most people.
“There is naturally a concern that the right balance is struck between providing improved retirement outcomes for all and not having a detrimental impact on working life incomes (by pitching contribution levels too high and creating more opt-outs).
“But time is pressing and the DWP needs to expedite any further research it wishes to conduct in this respect. The first “end products” from auto-enrolment saving will soon start to materialise and are likely to disappoint many enrollees who might have been expecting more from their pension plan, however unreasonably given the low level of contribution they had made. This could lead to a wider disillusionment with the system as a whole.
“In the circumstances an early increase to say 11% (6% employee, 4% employer, 1% tax relief) of attributable earnings might be more appropriate and would help to secure better outcomes for millions more in the future.”
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