Pensions minister Guy Opperman argued there is a need for firms to have a savings product offering, in addition to a pensions package, as a means of retaining staff.
Speaking at the International Longevity Centre UK offices today (June 29), Opperman discussed the future of pensions and listed his 25-year manifesto.
He said pre-pandemic 10mn people did not have £100-200 saved and while more recent data looking at the post-pandemic period is not yet available, "the figure still is not great".
Explaining his conversation with companies recently, he said many are offering 10 to 15 per cent pension packages and are struggling to recruit young people.
However, he argued it is because this is not what young people are excited by.
“If you speak to young people about what they are really interested in, first of all, for a bloke it is mainly buying a car. And if you're a couple, it's definitely buying a house deposit.
"If you change that and effectively have a default, but you add on savings as part of the sign on package, it's amazing for staff retention and the difference that makes.”
He explained that those in their 30s are not "excited by or enthused" by a 10 to 15 per cent pension package but they are enthused by an 8 per cent pension package with 5 per cent savings on top of that.
“I do feel very strongly that we need to get to a situation where we have default 1 per cent savings that is taken out of pre-existing pay.
“It's not a situation where you are giving enhanced pay, but you are being paid and creating a 1 per cent savings pot which very quickly would build up a cushion that everybody wishes to have.”
“We should have a rainy day savings as a de facto policy,” he added.
Dashboard logistics are 'Herculean'
During the breakfast briefing, Opperman also listed his 10-point focus for the next 25 years.
He said the areas of focus would be: auto-enrolment, small pots, rainy day savings, pension awareness, simpler statements, pensions dashboard, superfunds or CDC, reconsolidation, fuller working lives routine and charges.
Discussing the pensions dashboard, Opperman said: “Democratising pensions brings it into the 21st century, putting something on your mobile phone, your laptop, your iPad, that’s got to be the way ahead.
He said that those putting the dashboard together are “inundated with people who want to put add ons to it”.
“I fully get that,” he said. “Let’s just get the product over the line. This is the single biggest computer project effectively that the government is doing and the logistics of it are Herculean.”
He explained there is “slow but steady” progress being made and said within five years, there will be a “very cool dashboard that will be utilised on a massive basis”.
In relation to automatic enrolment, Opperman said he is “utterly certain” minimum auto-enrolment contributions will get to 12 per cent.