Reforming an important pensions policy could boost people’s retirement funds by £100,000, a group has said.
Standard Life is calling for the pensions auto enrolment standard amount to be increased from eight percent to 12 percent.
The group claimed this would add £96,500 younger workers’ retirement pots, increasing workplace pension contributions by around £10billion a year.
Andy Curran, chief executive officer of Standard Life, part of Phoenix Group, said: “Increasing minimum auto-enrolment contributions is fundamental to addressing this challenge, particularly as many people are unengaged with their pension or have low confidence in their pension knowledge.
“Alongside the benefits for future retirement incomes, there is a wider economic benefit that pension capital can play in driving investment to sustainable and productive assets, ensuring optimal outcomes for savers remain at the centre of investment decisions.”
Under the current rules, anyone aged 21 and over who earns £10,000 a year or more is auto enrolled.
This is being expanded with anyone aged 18 and over to be eligible and for any level of earnings.
The eight percent contribution can be made up of five percent from the employee and three percent from the employer.
With the earnings trigger held at £10,000 for this financial year, more workers are being auto enrolled as wages increase.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said previously: “Auto-enrolment has been an enormous success, but care needs to be taken that only those who can afford to save into a pension do so.
“It’s a tricky balance to strike – boosting pension saving is hugely important but it can’t be at the expense of someone’s overall financial resilience.”
She spoke about the type of low earners who may still have the funds available to pay into a pension.
Ms Morrissey commented: “There are lower earners who potentially can afford to save into a pension – for instance, young people living at home, those who are part of a higher earning household or someone who may have more than one job.
“Making sure that these groups are aware they can choose to be auto-enrolled and build up a pension if they wish is really important and this will be further boosted when the measures contained in the Auto-Enrolment Extension Bill are finally introduced.”
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