The Pensions and Lifetime Savings Association (PLSA) has called on the government to include UK workplace pensions in its broader UK 'Levelling Up' strategy by rebalancing and increasing auto-enrolment contributions.

In its response to the Work and Pensions Committee’s call for evidence on saving for later life, the PLSA highlighted three key proposals that would expand the scope of auto-enrolment and increase contributions for “millions of workers”.

This includes extending the current auto-enrolment regime during the mid-2020s to include younger people and pension savings from the first pound or earnings.

Whilst the government has previously committed to implementing both of these changes in the "mid-2020s", the PLSA emphasised that this “needs to go into legislation as soon as possible”.

In addition to this, the PLSA recommended that auto-enrolment contributions be rebalanced, to ensure that employers and employees are both paying 5 per cent of salary.

It explained that whilst this would not require higher contributions for employees, the increase in employer contributions from 3 per cent to 5 per cent would push total pension contributions up from 8 per cent to 10 per cent.

The association also suggested that a further increase of 1 per cent be added for both employers and employees "when affordable" in the early 2030s, bringing the total automatic enrolment pension bringing the total contribution to 12 per cent.

Whilst the PLSA acknowledged the "stark reality" that many people will not save enough for their retirement at the current contribution rates, it suggested that the phased timeline would lighten the affordability burden on individuals amid recent cost of living increases.

PLSA director of policy and advocacy, Nigel Peaple, commented: “Current contribution levels are not likely to give people the level of retirement income they expect.

“People’s inertia has driven the success of automatic enrolment in helping millions of people to save for their retirement but inertia also means they assume that the statutory minimum is the right level. In many cases this is not the case.

“As the government seeks to ‘level up’ the economy, narrowing wealth disparities between regions and different demographics, we think now is the right time for the government to commit to levelling up pensions, gradually, over the next decade, in three affordable steps.

“A government timetable now, as part of the Levelling Up strategy, for modest increases over the next decade, will ensure pension savers are not overlooked or undervalued.

“Pension adequacy is the PLSA’s main strategic project in 2022 and we will be doing further policy and research work on this, with our member pension schemes, over the course of the year.”

Industry experts have also called on the WPC to use its influence to urge the government and regulators to work with the pensions industry on improving member outcomes.

Share Story: