There will still be a need for voluntary pension savings even if the minimum auto-enrolment contribution rate is increased to 10 or 12 per cent, Aviva wealth policy director, Emma Douglas, has warned, arguing that boosting minimum pension contributions alone will not solve the UK’s retirement adequacy challenge.

Responding to a question during a panel session at the Association of Member-Nominated Trustees (AMNT) Spring Conference, Douglas claimed that many savers - particularly median earners and above - would need to contribute more than the statutory minimum to secure a comfortable retirement.

She suggested behavioural economics-based approaches could help encourage higher contributions, highlighting “save more tomorrow” style programmes used in the US that allowed individuals to commit to increasing pension contributions when they received future pay rises.

“The pain today is nil because you don’t have to pay anything today,” she explained.

“Then tomorrow, when that pay rise happens, you never had that money anyway, so you don’t feel the pain quite so much.”

Douglas noted that when such programmes were voluntary, participation typically reached around 30 per cent, but when implemented through opt-out mechanisms, it rose to around 70 per cent.

She also warned that younger savers often remained hesitant to increase pension contributions because they were uncertain about the long-term future of the state pension.

“What I tend to find when talking to younger people is that they really doubt whether the state pension will exist when they get to retirement,” she said, adding that this uncertainty could make individuals reluctant to commit additional income to long-term pension saving.

Douglas suggested the industry’s engagement efforts often focused on individuals closer to retirement, rather than younger cohorts who may benefit most from saving earlier.

“We probably don’t talk about it enough to that younger cohort,” she stressed, noting that pension engagement often increased when individuals reached their 50s and began to see retirement approaching.

Meanwhile, Douglas also raised concerns about savers transferring workplace pension pots into retail products that may charge significantly higher fees, suggesting heavy television advertising could be encouraging some individuals to move their savings into more expensive arrangements.

“I think it is a risk,” she stated, noting that many providers were seeing asset flows move towards firms that heavily advertised directly to consumers.

To address this, Douglas argued that the forthcoming Value For Money Framework should eventually be extended beyond workplace pensions to include the retail market, suggesting this could help create a more level playing field for savers deciding where to hold their pension savings.

She also backed calls for stronger financial education initiatives to improve pension engagement, suggesting better coordination between organisations such as Pensions UK, The Pensions Regulator, the Financial Conduct Authority, and Money and Pensions Service.

“There are initiatives already, but they’re quite fragmented,” Douglas added. “Bringing them together could have more impact.”

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