Increasing the minimum auto-enrolment (AE) contributions could boost savers pension pots by £217,000, analysis from Standard Life has revealed.

The research showed that someone who began working full-time with a salary of £25,000 per year and paid the current minimum monthly AE contributions from the age of 22, could amass a total retirement fund of £434,000 at the age of 66, not adjusted for inflation.

However, if standard AE pensions from 8 per cent to 12 per cent, shared equally by the employer and employee, from the age of 22, savers could accumulate as much as £651,000 by the age of 66, marking a £217,000 increase compared to the current standard contributions.

Given this, the firm argued that extending AE could have a potentially “transformational” impact over the course of a career.

It also pointed out that those who started saving via auto-enrolment later in life, and have had less time to build a pot, could see an even greater relative benefit of higher minimum contributions as they look to secure a liveable income in retirement with less time to save.

The comments were made amid the launch of the government's 'landmark' pensions review, which is set to consider further steps to improve pension outcomes, including assessing retirement adequacy, and increase investment in UK markets.

With the second phase of the review set to include savings adequacy as a core focus, Standard Life managing director for workplace pensions, Gail Izat, argued that raising minimum contributions could be a "powerful" way of setting people up for pensions success and future financial wellbeing, benefiting both employees and businesses in the long-term.

“In other countries like Australia, where minimum contributions are set to reach 12 per cent from next July, higher contributions have led to greater savings adequacy and a higher anticipated standard of living in retirement than the UK," he added.

Adding to this, Phoenix Insights head of research analysis, Patrick Thomson, said: “As many as 17 million UK adults are not saving enough to retire when they want on the income they want, so a plan to increase minimum auto-enrolment contributions is crucial to addressing widespread under saving.

“Auto-enrolment has been an important policy to boost pension participation, but the current minimum rate is unlikely to provide most people with enough savings to achieve the income in retirement that they want or expect.

“Engagement with pensions is low and there is a risk that people are lulled into a false sense of security that the statutory contribution rate will provide enough savings for their retirement needs.

“We hope the government’s review of pension adequacy will pave the way for an increase to minimum contributions when the economic conditions are right.”

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