Nigel Peaple, Director Policy and Advocacy, PLSA, said: “We are very pleased to see other voices, the Resolution Foundation and Aviva, joining us to highlight that people are not saving enough for retirement. We hope the Government and savers take note to help ensure everyone achieves an adequate income in retirement.
“The Resolution Foundation’s proposal identifies a target level of income in retirement which, like the PLSA’s Retirement Living Standards, is based on the basket of goods methodology used in the Minimum Income Standard. There are two main differences: the Living Pension includes the cost of paying rent in retirement as the Resolution Foundation estimates that in the future about half of those on middle to low incomes – the focus of the Resolution Foundation’s work – are likely to have to meet this cost. The other key difference is that the Resolution Foundation focuses on one level, a minimum, whereas the Retirement Living Standards also provide two higher levels of lifestyle.
“The Living Pension analysis estimates that someone in their 20s on average earnings of £25,000 per year will need to increase their pension savings from the current automatic enrolment rate of 8% of a specified earnings band to a little over 11% of all earnings. This aligns with the PLSA’s proposals, announced in 2018, for automatic enrolment contributions to be increased to 12% in the late 2020s with the transition completed by 2030.
“The PLSA’s proposals on pension contributions envisage that employees would be asked to pay only 1% more than now, and that employers would be asked to pay 3% more. People on lower incomes would have the option to keep saving at only 8% if they found that more affordable. Needless to say, while we all wrestle with the effects of the pandemic, now is not the right time to introduce such a measure but it is important Government considers these issues soon so that, a decade in the future, we might be able to ensure people are saving at the right rate.
“Later this year, the PLSA will be updating the three levels of the Retirement Living Standards – Minimum (£10k), Moderate (£20k), and Comfortable (£30k). This will provide some very interesting post pandemic findings. Currently, over 40 pension providers, including Legal & General and The People’s Pension; and workplace pension schemes operated for employees at companies like M&S and Tesco, are using the Retirement Living Standards. We estimate they are reaching over 14 million savers.
“We welcome the proposal that the Living Wage Foundation will consider how to encourage employers to provide higher levels of savings. The PLSA has long celebrated employers and schemes that provide high levels of pension contributions. Since 2009, the Pension Quality Mark has been used to denote well run pensions that have a contribution level of between 10% and 15%. Today, over 150 employers hold the Pension Quality Mark."
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