The window to support people on a median income save enough for retirement is closing, a report from Phoenix Group has claimed.
The provider has therefore proposed increasing auto-enrolment contributions from 8 per cent to 12 per cent.
The report, in partnership with WIP Economics, was published today (April 24) and looked at the costs of delaying an increase in auto-enrolment contributions.
Standard Life CEO, Andy Curran, said: “As we approach a general election, it is imperative we start to address the problem of insufficient pension savings.
“The urgent need to increase contribution levels is evident, and the future implications of inaction are too significant to overlook.
“By exploring practical solutions and taking steps towards increasing contributions, we can ensure a brighter and more secure retirement for all individuals in the UK.”
The report said, for a typical 18-year-old, increasing contributions from 8-12 per cent could lead to £96,000 more in their pension pot, equivalent to £64 a week.
However, delaying this increase by 15 years would reduce the final pension pot by £35,000.
Gail Izat, head of workplace pensions at Standard Life, said: “Without action we risk exacerbating undersaving for people of working age as they move closer to retirement as well as depriving the economy of a highly sufficient line of finance.
“Raising contributions as soon as possible has benefits for all.”
The report also looked at the impact of more people renting as they enter retirement on pension pots.
It is expected 17 per cent of retirees will live in the private rented sector in 2041 while half of new homeowner mortgages issued in 2021 are due to end after the borrower is older than 65.
It said increasing contributions is a tool to address retirement housing costs.
The report concluded that as a general election approaches there is “urgent need” to increase pension contributions.
tara.o'connor@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
