Aviva has renewed calls for a ‘living pension standard’ to encourage businesses to tackle what it has dubbed a “major vacuum” in pension preparedness.
In research published today (September 20), the insurer found 42 per cent of UK employees it surveyed did not know how to plan for retirement, and just 27 per cent said they knew what a ‘good’ pension amount was at their age.
Aviva envisions a pension equivalent to the living wage standard, which works by naming employers which pay their workers at least the minimum wage.
Without these licences in place for pension contributions, the insurer told businesses and the industry they could be facing “a national retirement income crisis”.
“There is a major vacuum in retirement preparedness which businesses can help to fill,” said Laura Stewart-Smith, Aviva’s workplace savings and retirement head.
“We’ve seen the lines between home and work become blurred beyond recognition for many people during the pandemic. As we look ahead to the future, employers will play a key role in helping people to manage their workplace pension to their best advantage.”
At present, all employers are legally required to offer a workplace pension for workers who meet the auto-enrolment pension criteria. This has to be topped up by at least 3 per cent of a worker’s pensionable earnings.
But Aviva has been campaigning since January for the industry to consider creating a ‘living pension standard’ to improve pension outcomes for workers, publishing the report ‘Building a Living Pension’ with the Resolution Foundation at the time. But it is yet to publish its proposal for how the standard could work.
By its own calculations based on an average UK salary of £30,000, an employee aged 40 today with no savings could build a pension pot “of about £92,000” by the time they reach the age of 65, based on the current minimum employee and employer pension contributions under auto-enrolment. So it's never too late to start saving, it said.
Access to advice
Mary Harper, managing director of Aviva Financial Advice, said accredited employer know-how would also help those unable to obtain their own financial advice.
“People who access financial advice are, on average, tens of thousands of pounds better off in the long-term, but it’s not always something people feel they can relate to, benefit from or feel is designed for people like them,” she explained.
“It’s important that people have sufficient financial knowledge to make the right decisions for them at the right time.
“Access to a combination of information, guidance and advice via the workplace can help people make the most of their money for the long-term.”
Some 59 per cent of employees Aviva spoke to said they “would be open” to receiving pension planning support at work, with more than half (51 per cent) also of the belief they will need support from their employer to create an easier transition into retirement, such as flexible or part-time working.
Looking at those surveyed between the ages of 40 and 54 - otherwise known as ‘Gen X’ - Aviva found nearly two in five (39 per cent) “haven’t even started” thinking about retirement.
Covid-19 has exacerbated this. The insurer found the number of employed people who said they know how much they need to save for retirement dropped “sharply” from 61 per cent in February 2020 to 52 per cent today (September 2021).
The worsening of pension provisions as a result of the pandemic hit women particularly hard.
Last year, the gender pension gap for over-55s grew from £157,263 to £183,936, widening by 17 per cent (or £26,673) as Covid-19 took its toll on women’s finances.
ruby.hinchliffe@ft.com
