News comes as “Living Pension Employer” standard launched to reduce risk of poverty for low-paid workers in retirement
- Over half (56%) of people who contributed to a pension in the last 12 months feel like they will never be able to retire.
- Previous research showed 4 in 5 workers in defined contribution schemes (16 million people) are not saving at levels likely to meet basic needs in retirement.
- 9% of pension savers stopped or reduced contributions in the last 6 months.
- 8% plan to cut pension contributions in the next 6 months.
- News comes as Living Wage Foundation launches new “Living Pension Employer” standard to provide low-paid workers with stability and security in retirement.
- The “Living Pension Employer” standard is a voluntary savings target for employers who want to help workers build up a pension pot that will provide enough income to meet basic everyday needs in retirement.
- The savings target is 12% of a worker’s salary, of which the employer pays in at least 7%. This builds on auto-enrolment, where the employer only has to contribute 3%.
- The standard launches with 6 employers signed up to the standard: Aviva, Phoenix Group, Herbert Smith Freehills, Good Things Foundation, Wealthify and Citizens UK.
Most current pension savers feel like they’ll never be able to retire, new Living Wage Foundation research reveals.
Polling of over 3,000 people who saved into a pension in the last year, by the Living Wage Foundation and Savanta, found that over half (56%) of pension savers feel like they’ll never be able to retire. 2 in 3 (64%) feel they will need to work several years beyond retirement age, and nearly 2 in 5 (37%) are not confident that they are saving enough to meet even basic needs in retirement.
Research by Resolution Foundation completed in 2022 suggests these perceptions are correct. It found that 4 in 5 workers (16 million people), and 95% of low-paid workers, paying into defined contribution schemes were not saving at levels likely to achieve a pension pot that meets basic needs in retirement. To meet this savings level, a worker saving at the auto-enrolment minimum levels would need a pre-tax salary of £38,000.
Making matters worse, pension savers are being forced to cut their contributions as the cost-of-living crisis bites. The new Living Wage Foundation and Savanta polling found 9% had stopped or reduced their contributions in the last 6 months, and 8% plan to cut their contributions in the months ahead. Of those who cut their contributions, 42% blamed rising living costs, among whom 85% said they had seen costs rise most in groceries and utility bills.
Today, the Living Wage Foundation launches a new Living Pension standard to tackle low pension saving. The Living Pension is a voluntary savings target for employers who want to help workers, especially those on low pay, build up a pension pot that will provide enough income to meet basic everyday needs in retirement. The Living Wage Foundation is at the heart of the independent movement of businesses, organisations and people who believe workers should be paid a real Living Wage that meets basic everyday needs. The Living Pension builds on the work of the real Living Wage by providing stability and security for workers in retirement.
Many employers already recognise the challenge of low pension saving and are stepping up to support their employees. The Living Pension launches with six employers signed up to the standard: Aviva; Phoenix Group; Herbert Smith Freehills; Good Things Foundation; Wealthify; and Citizens UK. The standard launches at an event at the Edinburgh offices of Phoenix Group, with a second launch event at Herbert Smith Freehills in London.
The Living Pension savings target is 12% of a worker’s annual salary, of which the employer pays in at least 7%. This builds on auto-enrolment, where the employer is only required to contribute 3%. The Living Pension savings target can also be implemented as a cash amount of £2,550 a year, based on 12% of a real Living Wage worker’s salary. The employer contributes at least £1,448 to this cash amount.
Katherine Chapman, Director of the Living Wage Foundation, said: “Low pension saving levels are a long-standing issue and our research shows that workers are worrying about an uncertain future. The current cost-of-living crisis is exacerbating the problem. Struggling to make ends meet as living costs soar, many workers are unable to prioritise pension saving, which risks storing up a future crisis of millions unable to afford even the basics in retirement.
Over the last ten years the Living Wage campaign has grown in strength and numbers. Now paid by over 12,000 employers, it delivers essential pay rises to over 450,000 workers every year. The Living Pension builds on this by encouraging employers to do more to help their workers build a pension pot that meets basic everyday needs in retirement, providing stability and security for workers now and in the future.”
Mubin Haq, Chief Executive of abrdn Financial Fairness Trust said: “Good progress has been made on pensions in recent years, especially the introduction of auto-enrolment and the triple-lock. Some might think job done, but we are storing up future problems as millions are not saving enough towards their retirement: four in five workers on defined contribution schemes are falling short of what they need to have a decent standard of living in old age. A living pension provides employers with a model to do the right thing and ensure their workforce are not facing hardship in the future.”
Nigel Peaple, Director of Policy and Advocacy at the Pensions and Lifetime Savings Association (PLSA) said: “I am very pleased to support the Living Pension which seeks to encourage better pensions and higher employer contributions, especially for employees on a modest income. The new initiative, alongside existing measures like the Retirement Living Standards and the Pensions Quality Mark, helps employers and employees identify good provision.”
