Over two in five (43 per cent) business leaders believe minimum workplace pension auto-enrolment (AE) contribution levels should increase, according to research from Standard Life’s Centre for the Future of Retirement.

The polling also found strong support for a gradual approach to reform, with nearly three-quarters (73 per cent) backing a phased timetable to increase contribution levels if they were raised.

The research, which surveyed 500 business leaders, showed that a further 36 per cent believed AE contributions should remain at current levels, while 6 per cent thought the rate should be lowered and 8 per cent believed contributions should be set by individual employers.

Meanwhile, support for higher contribution rates was stronger among larger employers, with 54 per cent of businesses with more than 250 employees backing an increase.

Half (50 per cent) of medium-sized employers with between 50 and 249 employees also supported raising contribution levels.

The findings come amid growing concerns over retirement adequacy, with government estimates suggesting that more than 15 million working-age people were on course for an inadequate retirement income.

The research formed part of a wider report from the Standard Life Centre for the Future of Retirement, Defying Inertia, produced by the Institute for Employment Studies, which examined employer attitudes to boosting pension savings.

Among businesses considering raising pension contributions over the next five years, the most common motivation cited was supporting employee wellbeing and long-term financial security (37 per cent).

The same proportion (37 per cent) said they believed it was their responsibility to help employees save more for retirement, while 34 per cent viewed higher contributions as a way to help attract and retain staff.

However, employers also highlighted concerns about the timing, pace and cost of potential changes.

If contribution levels were increased, 73 per cent of business leaders said they would support a phased implementation timetable, while 72 per cent backed the ability to pause or slow increases during economic downturns.

In comparison, 57 per cent said they would support a shorter 6-12 month implementation period.

The report noted that while the introduction of AE has significantly boosted pension participation - with more than 22 million employees now saving into a workplace pension - gaps in coverage remained.

Indeed, employers participating in qualitative interviews said groups such as part-time workers, employees with multiple jobs, younger workers and those with fluctuating hours often fell outside the AE system.

Many also agreed that the current minimum contribution levels were unlikely to deliver a financially secure retirement for most savers, with inertia helping drive participation but keeping overall savings levels relatively low.

Alongside changes to contribution levels, the research also explored employers’ openness to other mechanisms to increase pension saving.

Over three fifths (61 per cent) of business leaders said they would consider introducing auto-escalation, while 59 per cent would consider payroll-linked ISAs and 49 per cent would consider sidecar savings arrangements as alternatives to salary sacrifice.

However, interviews suggested that awareness and adoption of these approaches remained limited due to concerns about complexity and cost, and the belief that a more fundamental reform of contribution levels may ultimately be required.

The findings also revealed support for changes previously recommended in the 2017 AE review.

Three-quarters (75 per cent) of business leaders said they would consider lowering the age threshold for default AE contributions from 22 to 18, while 70 per cent would consider lowering the £10,000 earnings trigger that determined eligibility for AE.

Standard Life Centre for the Future of Retirement director, Catherine Foot, said: “The success of AE is to be celebrated, but it’s clear more needs to be done to support low-to-middle earners, in particular, with minimum contribution levels giving people a false sense of security that they are saving enough for the retirement income they need.

“Employers recognise the important role they must play, with many doing more than the minimum, alongside supporting further change. Ultimately, ongoing inaction will mean costs will be borne by the government and society further down the line.

“If changes are to be introduced, we need to ensure broad support," she continued.

"It’s also crucial that employers have time to prepare with a clear roadmap for change - this is about evolution not revolution to improve pensions adequacy.

“As the Pensions Commission considers the future of the system, we have a crucial opportunity to ensure it remains fit for future generations while giving employers certainty.

"There are important times ahead as employers, government and the industry restore the promise of a decent retirement for future generations.”

Standard Life managing director for workplace and retail intermediary, Gail Izat, added that while employers "cared deeply" about supporting their people’s financial security, they were operating in tough economic conditions.

“Many know current pension contributions won’t deliver financial security in retirement for most employees, yet without a clear, manageable framework, it’s hard for businesses to act alone," Izat said.

"We need the right conditions to help employers raise saving levels sustainably, with enough time to plan and budget for change.”

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