Defined Contribution 

Majority of savers want mandatory pension contributions

Majority of savers want mandatory pension contributions

About two thirds (66 per cent) of UK savers are in favour of the government making pension contributions mandatory, new research from pensions consultants LCP shows.

The survey, in which YouGov polled 2,008 British adults in August, also found for those aged 55 and above, this figure rose to more than three quarters (78 per cent). 

LCP said there was a generational shift in attitude, as only half of those aged 18-24 believed pension saving should be compulsory.

Currently, UK savers which have been auto-enrolled in a pension scheme, have the choice to opt-out of making pension contributions.

Auto-enrolment minimum pension contributions increased in April, from 2 per cent to 5 per cent. In 2019 they will increase again to 8 per cent, with the employee paying 5 per cent.

The research showed that views regarding the level of savings considered adequate varied widely. Some 21 per cent of workers felt the total amount that should be saved – combining contributions from themselves and the employer - was at least 11 per cent of their monthly salary.

However, 11 per cent of 18-24 year old workers thought that just 1-2 per cent of their total monthly salary was enough to give financial security in retirement. 

Across all ages, a quarter of workers said they did not know what they thought the minimum combined contribution should be.

Regarding the minimum mandatory employee contribution, 43 per cent of respondents thought this should be 3-5 per cent of their monthly salary, while about a quarter thought this figure should be 6-10 per cent.

Bob Scott, senior partner at LCP, said auto-enrolment has been hugely successful in getting millions more people saving for their retirement, but there was still some way to go.

He said: "Auto-enrolment does not include low earners or the self-employed which means that there are still more than 10 million private sector workers who are excluded. 

"Rates of opt-out have generally been lower than expected, which we hope will continue to be the case when contributions rise in April 2019. In the longer term, government should also plan for contributions to rise significantly above 8 per cent of qualifying earnings."

Mr Scott said he was relieved the Chancellor of the Exchequer, Philip Hammond, had resisted the temptation in the Budget to tinker with changes to pensions taxation, but he is urging the government to "commit to policies that ensure meaningful levels of retirement savings.

"Making pension saving compulsory could move things forward," he added.