The report evaluates potential reforms that could be implemented to increase minimum contributions, and the effect this may have for households and the wider economy, both short and long term.
Despite the success of automatic enrolment, doubling take-up in the private sector in just a few years, analysis from Oxford Economics indicates only 40% of households with a defined contribution (DC) scheme will have the savings needed for a ‘moderate’ standard of living in retirement by 2040.
Jamie Jenkins, Director of Policy at Royal London, said: "Automatic enrolment has undoubtedly been a huge policy success, reversing the decline in workplace retirement saving that started almost half a century ago. However, it remains unfinished business, with contribution rates at a level that will still leave many people unable to afford the standard of living they aspire to in retirement.
"People and businesses are facing many financial pressures at the moment and now isn’t the right time to increase contributions, but any reforms are likely to take many years to implement, so we should start planning now. Failure to do so could lead to a much bigger cost-of-living crisis in the decades ahead as today’s younger workers reach retirement."
Henry Worthington, Director of Economic Consulting at Oxford Economics, added: "Our latest analysis finds that many households fail to save adequately for retirement and that higher pension contributions can improve the adequacy of pension savings. However, we also show that poorer households may find it challenging to afford higher pension contributions?an important consideration for any potential policy reform.
"In addition, the analysis highlights the potential boost to economic growth from higher pension contributions. By 2040, UK GDP could be £0.4 to £7.4 billion higher, compared to our baseline."
Royal London report on Exploring the Implications of Higher Pension Contributions
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