Workplace pensions provision should be levelled up, MPs told
Minimum workplace pension contributions should be increased from 8% to about 12% over the next decade, the Work and Pensions Committee heard.
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Your support makes all the difference.There should be a “levelling up” of workplace pensions provision, with minimum contributions being increased in the coming years, MPs have heard.
Nigel Peaple, director of policy and advocacy at the Pension and Lifetime Savings Association (PLSA), which represents pension schemes, told the Work and Pensions Committee: “We think it’s very important to up the contribution levels of automatic enrolment.”
By law, employers and employees enrolled into workplace pensions must make minimum contributions into them. This is currently set at 8% of eligible earnings.
Within this, the employer must pay in at least 3% of earnings, with the employee making up the remaining 5%.
There would be a levelling-up of pension provision
Paying in just the minimum is unlikely to give many people the kind of retirement living standards they would want.
However, at a time when people are being squeezed by surging living costs, it may be a struggle for some people to pay in any more than the minimum.
Mr Peaple told the committee the “voluntary saving side (of automatic enrolment) hasn’t come through”.
He continued: “We believe the answer is to increase automatic enrolment contributions, and our view is that you could go from the current 8% of band earnings to about 12% of all earnings, over the next decade.
“No need to rush it – very importantly, we think that given the cost-of-living crisis at the moment it shouldn’t be rushed.
“And ideally you might do this in two steps; the first step being you increase the employer contribution from 3% to 5%, which would match the employee contribution.
“Do that by 2030, there would be a levelling-up of pension provision.
“And then you could try and add on an extra per cent or so after that.”