Living Pension
We have been funding the development of the Living Pension since it was established by the Living Wage Foundation
What is a Living Pension?
A Living Pension is a voluntary savings target for employers who want to help their workforce build up a pension pot that will provide enough income to meet basic everyday needs in retirement.
A Living Pension standard builds on the work of the real Living Wage by providing stability and security for workers in the future. The standard sets out the minimum annual contribution required through an average working life to reach this savings level and employers commit to making sure all workers can access this.
It applies to all employees over the age of 18 and applies to all earnings up the auto-enrolment limit of £50,270. Over time the Living Pension must also be extended to third party contracted staff within scope of the real Living Wage.
How much is the Living Pension?
Living Pension employers commit to contributing a minimum of 7% of a worker’s salary, or a cash amount of £1,720 to workers’ pension pots annually, whilst workers contribute 5% of their salary, or a cash amount of £1,230 annually.
The Living Pension standard is 12% of a worker’s salary, or a cash figure of £2,950. Read more on how is it calculated here.
Why do we need a Living Pension?
Whilst there has been some good progress on pensions in recent years, especially the introduction of auto-enrolment which has led to millions more saving towards their retirement, the amounts saved in defined contribution schemes fall far short of what is needed. This affects all workers, but those in low pay even more acutely.
Research funded by the Trust and undertaken by the Resolution Foundation found that 80% of workers on defined contribution schemes (16 million people) are not saving enough to meet their needs in retirement.
Low-paid workers are the least likely to be saving enough, with fewer than 5% saving at a rate which would provide an adequate standard of living in retirement.
When was the Living Pension established
In March 2023 the first Living Pensions employer accreditations were announced. This is a scheme which the Trust has developed with the Living Wage Foundation, providing around £400,000 in funding.
How many employers pay the Living Pension?
There are now over 60 employers paying a Living Pension. This includes Aviva, Legal & General, SSE, Newcastle Building Society and Coastline Housing.
We expect the number of employers signing-up to grow, which we hope will add momentum to further changes to auto-enrolment by demonstrating that employers are willing to pay more towards pensions.
How do employers sign up to the Living Pension?
There are five key stages to becoming a Living Pension employer:
- Review the pension contributions offered to all directly employed staff
- Collate and document pension contributions for all third party contracts
- Work with Living Wage Foundation to identify changes needed
- Make changes to pension plan and agree milestones
- Accredit in the Living Pension and celebrate!