Pension saving involves putting a set amount of money away now to ensure one has enough to see them through in retirement. However, despite schemes such as auto-enrolment set up to encourage more Britons to save, this does not mean every person will get the retirement they are hoping for. Those who only pay a minimum amount in workplace auto-enrolment schemes, alongside those who are not eligible for whatever reason, may fall short of accumulating enough for later years.
“In this context there is a clear need for a Living Pension standard to encourage and reward employers going beyond auto-enrolment minimums, and reassure employees – particularly those on lower incomes – that their workplace pension is designed to deliver a decent standard of living in retirement.
“The introduction of a Living Pension will help low-to-middle income employees focus on how they can reach a decent standard of living in retirement.
“Low-cost, accessible services like tailored guidance and simplified, focused advice could support individuals in achieving this outcome.”
Calculations outlined in the report show, on average, workers need to save £3,000 to meet the Living Pension target.
However, for those currently on the Living Wage, that is £1,500 more than their current minimum auto-enrolment requirements.
This change would be equivalent to an additional eight percent contribution rate, but would, of course, vary depending on a person’s position in their retirement journey.
At present, the minimum pension contribution in the workplace stands at eight percent.
Some three percent is contributed by the employer, one percent is gained from tax relief provided by the Government, and Britons are required to provide the other four percent.
While the pension pot a person will need varies from circumstance to circumstance, the report did provide estimates.
However, of current low to middle-income employees, the average pension pot was calculated at £70,000.
The Department for Work and Pensions (DWP), recently reviewed the auto-enrolment earnings trigger and qualifying earns band for the coming tax year.
The existing threshold of £10,000 will remain at the same level, with the trigger not being changed since 2014.
A DWP statement said: “Automatic enrolment has seen over 10 million workers enrolled into a workplace pension to date, with an additional £22.7 billion per year being saved compared to 2012 among eligible employees. Our ambition remains to enable people to save more and to start saving earlier. This Government is taking clear steps – such as the ongoing development of pension dashboards – to achieve this.
“However, helping workers secure greater financial security in retirement must always be a collective effort – with individuals, employers, the pensions industry and Government each playing their part.”
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