Martin Palmer, Zurich’s Head of Corporate Funds Propositions, said: “Contribution rates need to increase above 8% but this should be done gradually over time.
“Increasing the minimum beyond 8% too quickly could lead to masses of employees opting out, especially when real wage growth is stagnant and the outcome from Brexit is still uncertain.”
Palmer said auto-enrolment has been a success and that the Government’s top priority should now be extending it to workers excluded from it.
“Despite growing vastly in number, self-employed workers saving for retirement benefit from fewer incentives to save,” Palmer said.
“Moving to a flat rate of pension tax relief and allowing self-employed people to deduct pension contributions from profits – giving them an effective tax break on national insurance- would help even out this disparity.”
He added: “The Government should also take action to auto-enrol younger and older employees and those on lower salaries, especially those individuals that have more than one job.
“This could be done by removing the upper and lower age limits – currently 22 years of age to the State Pension age – and reducing the lower earnings band limit of £10,000.
“For employees on lower incomes, the amount they pay in could be increased by basing contributions on full salary, rather than band earnings, or by reducing the auto-enrolment earnings trigger.”
In the meantime, Palmer said the Government and the Pensions Industry should focus on ways to encourage people to save more through enhanced engagement and schemes such as Save More Tomorrow.
“In the short-term, there are other ways to boost saving levels, including rolling out a Save More Tomorrow scheme, which would see a slice of every pay rise workers receive added to their pension contributions, unless they choose to opt out.
“We should also be looking at engaging people to save by helping them to understand the value of a pension, and the importance of building up a nest egg for retirement.”
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