The Living Pension targets savings of 12 per cent of a worker’s annual salary, of which the employer will contribute at least 7 per cent.
This is a figure many in the industry are campaigning to move auto enrolment towards, which currently requires the employer to contribute only 3 per cent.
The framework allows for the savings target to be implemented as a cash amount of £2,550 a year, based on 12 per cent of a real Living Wage worker’s salary. The employer would be responsible for at least £1,448 of this cash amount.
The living wage is currently £11.95 for London and £10.90 for other parts of the UK. The national minimum wage is currently £9.50 for those over 23, which will rise to £10.18 in April.
The campaign was prompted by research from the Resolution Foundation in 2022 which found that four in five workers (80 per cent, or 16 million people) who save into defined contribution (DC) schemes, and 95 per cent of low paid workers, were not saving enough to meet their needs in retirement.
Bleak future
New research from the Living Wage Foundation found that more than half of pension savers (56 per cent) feel they will never be able to retire.
The survey, of more than 3,000 UK pension savers, also found:
- 64 per cent feel they will need to work several years beyond retirement;
- 37 per cent are not confident that they are saving enough to meet even basic needs in retirement;
- 9 per cent stopped or reduced contributions in the last six months;
- 8 per cent plan to cut pension contributions in the next 6 months;
- 42 per cent of those who cut contributions blamed rising living costs.
Katherine Chapman, director of Living Wage Foundation, said: “Low pension saving levels are a long-standing issue and our research shows that workers are worrying about an uncertain future. The current cost-of-living crisis is exacerbating the problem.
“Struggling to make ends meet as living costs soar, many workers are unable to prioritise pension saving, which risks storing up a future crisis of millions unable to afford even the basics in retirement.”
The Living Wage campaign has grown in over the past decade. It is now paid by more than 12,000 employers, providing essential pay rises to more than 450,000 workers each year, said Chapman.
“The Living Pension builds on this by encouraging employers to do more to help their workers build a pension pot that meets basic everyday needs in retirement, providing stability and security for workers now, and in the future.”
Doing the right thing
Alison Brown, executive partner at Herbert Smith Freehills, said the cost-of-living crisis has highlighted the stark difficulties faced by far too many individuals who struggle to manage financially on a daily basis. These challenges could worsen and many do not save enough for their future.
“Being a responsible employer is about more than ensuring staff are looked after while they work for you; it is about recognising that providing employees with stability and security in retirement is just as important.”
Mubin Haq, chief executive of Abrdn Financial Fairness Trust said that more needs to be done, despite the good progress has been made on pensions in recent years, such as the introduction of auto-enrolment and the triple-lock.
