Source · Select Committees · Work and Pensions Committee
Recommendation 5
5
Acknowledged
Paragraph: 49
There is a consensus that many people need to increase their pension contributions if they...
Recommendation
There is a consensus that many people need to increase their pension contributions if they are to have an adequate income in retirement. Many told us that minimum contribution rates needed to increase above 8% if this was to happen. We welcome the former Pensions Minister’s aspiration to work towards a 12% minimum contribution rate, as in Australia. There are good arguments for starting with an increase in employer contributions to 5%, level with employees. And any move to increase contributions should aim to increase pension saving for the right people at the right time. We welcome the fact that DWP is doing research to understand the impact on low earners.
Government Response Summary
The government acknowledges that current contribution rates may not be adequate but states that its priority is to implement the 2017 Review measures in the mid-2020s and explore ways to prompt savers to engage with their pensions.
Paragraph Reference:
49
Government Response
Acknowledged
HM Government
Acknowledged
As part of its priorities, the government is focused on economic stability and growth, which supports higher wage levels and opportunity for increased retirement saving in future. Recognising the current economic context, however, we have been clear that the next step for Automatic Enrolment is the implementation of the 2017 Review measures in the mid-2020s. Current statutory contributions of 8% on a band of earnings are unlikely to give all individuals the retirement to which they aspire. That is why, we remain committed to implementing the Review measures, as a first step, to improve workplace pension coverage and savings levels. Taken together these measures support our policy goal of enabling low to medium earners to save more for their retirement. This remains our priority before looking at further changes. Alongside this we are continuing to explore how we can prompt savers to engage with their pensions, through tools such as the pensions dashboard and the introduction of the Simpler Annual Benefits Statement, which will help individuals plan appropriately for later life.