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More than seven in 10 (71 per cent) UK adults said that the government should set out a plan to increase the minimum auto-enrolment pension contribution rate if it is too low for most people to achieve realistic retirement living, according to research from Phoenix Group.
In light of the findings, Phoenix Group called for a pension adequacy review, covering both private and state pensions, to support long-term financial security, urging all political parties to commit to delivering this in the next parliament.
There was also public support for this, as the research showed that 83 per cent of adults agreed that the government should assess whether the current pension system enables people to achieve an adequate retirement income.
When asked what an adequate retirement income was, the top response was an income level where basic needs were covered with some money left over for non-essentials, with the majority believing it’s the government’s responsibility to ensure people receive this retirement standard.
However, Phoenix Group said saving at the level of auto-enrolment, 8 per cent of salary per annum from employer and employee, is unlikely to provide enough funds for most people to meet their retirement goals.
Indeed, research from Phoenix Insights, Phoenix Group’s longevity think tank, suggested that around 14 million, or half of defined contribution (DC) pension savers, are not on track for their expected retirement income, with over two thirds (68 per cent) of this group facing a savings gap of more than £100,000.
Meanwhile, over a quarter (27 per cent) of non-retirees think the minimum auto-enrolment contribution rate is too low, while half (51 per cent) of this group think the minimum contribution should increase to at least 12 per cent and a fifth (20 per cent) think it should increase to at least 15 per cent.
Commenting on the research, Phoenix Insights director Catherine Foot said that although auto-enrolment had been successful in starting pension savings for millions, the current contribution rate was “too low” for most savers to have an adequate retirement income and may be giving a “false sense of security".
“We need a government plan to increase contributions and help address the pension saving gap, as part of a wider review of the pension system to ensure it is helping people to save enough and be more financially secure over the long-term,” she added.
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