Jessica BirdAegon has called on the newly formed Pension Commission to deliver bold recommendations to the Government, including a significant increase in auto-enrolment contributions for mid- and higher earners.
Kate Smith, head of pensions at Aegon, said the Commission must be prepared to make “bold, brave and possibly unpalatable recommendations” if it is to drive real change in pension saving.
She welcomed the Commission’s plans to examine pension inequality across key demographics.
Smith said: “We’re pleased the Pension Commission will investigate pension inequalities for key groups such as women, the self-employed and ethnic minorities,” adding that this could bring more people into pension saving.
Smith noted that millions are currently excluded from auto-enrolment due to age, income or employment status. “This includes those with multiple low paid jobs, who are mainly women.”
While more than 10 million employees have been auto-enrolled since 2012, Aegon warned that many are not saving enough for later life.
“Millions are under saving for their life after work and face a poorer income in retirement than today’s pensioners,” Smith said.
She argued that addressing inequality and affordability will require a broader view.
She said: “Sources of inequality and affordability are often linked to the way the labour market works, the housing market, and societal norms, such as women taking on most of the caring responsibilities.”
Smith added: “Helping people to understand what an adequate retirement income looks like, and how much they need to save to achieve this, could help more people secure a comfortable and sustainable retirement income.”
Referencing the work of the original Pension Commission two decades ago, Smith said: “This is an opportunity for the second Pension Commission to update these and to carry out a detailed analysis of how much people need to save regularly to achieve an adequate retirement income.”
She expressed disappointment that the Government had not prioritised earlier reforms. “We’re disappointed there is no mention of the 2017 reforms to auto-enrolment,” she said. “Implementing these could go some way to removing pension inequalities.”
While the Government has ruled out increasing auto-enrolment contribution rates during this parliament, Aegon cautioned that this approach could leave savers vulnerable. “The reality is that without higher pension contributions, mandated or voluntary, many people could face a bleak retirement.”
Smith acknowledged that pensioners would welcome the Government’s decision to maintain the triple lock.
However, she added: “Any further increase to the State Pension Age could affect how much people need to save privately to have an adequate retirement income from their chosen retirement age.”
