Bryan HayNew research from Phoenix Group, the UK’s largest long-term savings and retirement business, reveals that 71% of UK adults believe the government should increase the minimum auto-enrolment pension contribution rate if the current rate is insufficient for a sustainable retirement income.
The study highlights that 83% of adults support a government review of the pension system to ensure it enables people to achieve an adequate retirement income. This sentiment is consistent across different political preferences.
Phoenix Group is advocating for a comprehensive pension adequacy review to secure long-term financial stability. They urge all political parties to commit to this review in the next Parliament, suggesting it should evaluate both private and state pensions to ensure they work together to provide good retirement outcomes.
Concerns over contribution levels
Currently, auto-enrolment mandates a minimum contribution of 8% per annum from both employer and employee combined. However, Phoenix Group’s modelling suggests this rate is insufficient for most savers. Approximately 14 million people, or half of defined contribution pension savers, are not on track to meet their retirement income expectations, with 68% of this group facing a savings gap of over £100,000.
The research found that 27% of non-retirees consider the current contribution rate too low. Among these, 51% believe the rate should increase to at least 12%, and 20% suggest it should rise to at least 15%.
Calls for government action
Phoenix Group, in collaboration with WPI Economics, has proposed a framework for raising the minimum contribution from 8% to 12%, and analysed the financial impact of delaying this increase.
Catherine Foot, director of Phoenix Insights, commented: “Auto-enrolment has successfully kick-started pension saving for millions, but the current minimum contribution rate is too low for most savers to achieve an adequate retirement income and may be giving some a false sense of security. We need a government plan to increase contributions and help address the pension saving gap, as part of a wider review of the pension system to ensure it is helping people to save enough and be more financially secure over the long-term. Delays and inaction on this could leave generations of future retirees unable to enjoy the lifestyle they hoped for when they retire or struggling financially, with millions more relying on state support later in life.”
Gail Izat, managing director for workplace pensions at Standard Life, part of Phoenix Group, added: “More needs to be done to help people secure a decent standard of living in retirement, and raising minimum contributions is the single most powerful mechanism available. While it’s important that we move when the time’s right for both savers and employers, prolonged inaction risks continued under-saving and the UK sleepwalking into a retirement savings crisis. It’s clear that people support action on raising minimum contributions if the current rate isn’t adequate, and we urge the next government to put a review in place.”
