The Association of British Insurers (ABI) has called on the Pensions Commission to set out a clear roadmap for the gradual increase of auto-enrolment (AE) pension contributions to 12 per cent by the end of the 2030s.

It stated that building better retirement outcomes required raising contributions, with a phased approach needed to give businesses and savers time to plan and adjust.

In response to the Pensions Commissions interim report, the ABI highlighted its recent report on pensions adequacy, researched by the Pensions Policy Institute, which found raising minimum contributions to 12 per cent would have the greatest impact on improving saving levels among employees earning more than £18,700.

It proposed splitting contributions equally between employees and employers, which would result in a 1 per cent rise for employees and 3 per cent for employers, and could boost a median earner’s eventual pension pot by 50 per cent over the course of their working life.

The ABI called for the commission’s final recommendations to set out a clear plan for improving retirement adequacy by addressing AE eligibility rules, thresholds, and contribution levels, alongside a timetable and phased approach to implementation.

The commission was urged to consider gradually lowering the lower earnings limit (LEL) from £6,240 to £0, and gradually uprating the upper earnings limit (UEL) from £50,270 to £65,700, then annually increasing the UEL in line with average earnings.

Additionally, the ABI advocated for lowering the AE eligibility age from 22 to 16, and for the commission to recommend the government explore what changes can be made through self-assessment to streamline pension savings for self-employed people.

“AE has been one of the great public policy successes of recent decades, helping millions more people put money aside for later life,” commented ABI director of long-term savings & health and protection policy, Dr Yvonne Braun OBE.

“But while the current 8 per cent contribution rate was the right place to start, evidence increasingly shows it will not be enough on its own to deliver the retirement incomes many people expect and need.

“The question is no longer whether pension saving needs to increase, but how we get there. The destination is important, but so is the journey. Any increase in contributions must be gradual and predictable, ensuring it remains affordable for both employers and employees.”

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