Businesses have been encouraged to pay more into their employees’ pension pots in a move to meet a shortfall in retirement savings.
The Living Wage Foundation, a charity that campaigns for fair pay, launched a new “living pension employer” standard on Tuesday in a move to increase employer pension contributions from 3 per cent of employees’ wages to 7 per cent.
Combined with the current 5 per cent minimum for employee contributions, the voluntary initiative aims to raise pension contributions to 12 per cent of annual pay.
“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,” said Katherine Chapman, director of the Living Wage Foundation. The scheme complements the foundation’s “real living wage” initiative.
The new standard aims to increase pension savings for the low paid at a time when many have cut contributions to meet the rising cost of living.
Nearly one in 10 savers had stopped or reduced pension contributions in the past six months, according to polling company Savanta Comres. In a recent survey it found 42 per cent of those who cut contributions blamed rising living costs.
Fewer than 20 per cent of workers in a defined contribution scheme are saving at least 11.2 per cent of pay over their career, according to a study published by the Resolution Foundation.