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Living Wage Foundation launches Living Pension Employer scheme to drive up pensions, particularly for the lowest paid.
Over half of pension savers feel they’ll never be able to retire and one in 10 have cut their contributions as the cost of living crisis bites, according to a new survey by the Living Wage Foundation.
The survey of over 3,000 pension savers by the Living Wage Foundation, which has launched a Living Pension Employer standard to tackle low pension saving amongst low-paid workers, found over half (56%) of savers feel like they will never be able to retire. Sixty-four per cent feel they will have to work several years beyond retirement and 37% are not confident that they are saving enough to meet even basic needs in retirement. The survey also shows that nine per cent have stopped or reduced contributions in the last six months, with 42% of these blaming rising living costs.
The survey comes as another poll – by Interactive Investor – shows just 9% of retired people say increases to the pension annual allowance and money purchase annual allowance will encourage them to give up early retirement. 54% of retirees said the abolition of the lifetime allowance would not encourage them to work as they enjoy being retired, while another 20% said it would make no difference because they don’t have a large enough pension pot. Even some NHS workers who the Chancellor said some of the changes were aimed at said working conditions meant they would retire early regardless of tax changes. One commented: “I still intend to retire early regardless. It is the working conditions in the NHS that are the issue, not the tax situation!”
The Living Pension is a voluntary savings target for employers who want to help workers build up a pension pot that will provide enough income to meet basic everyday needs in retirement. It comes after research has shown that people – particularly the lowest paid – are not saving enough into their pensions to make ends meet in retirement and builds on the work of the real Living Wage by providing low-paid workers with stability and security now, and in the future.
The Living Pension savings target is 12% of a worker’s annual salary, of which the employer pays in at least 7%. This builds on auto-enrolment, where the employer is only required to contribute 3%. The Living Pension savings target can also be implemented as a cash amount of £2,550 a year, based on 12% of a real Living Wage worker’s salary. The employer contributes at least £1,448 to this cash amount.
One employer who has signed up is law firm Herbert Smith Freehills which will increase its pension contributions from 8% to 12%. “Being a responsible employer is about more than ensuring staff are looked after whilst they work for you; it is about recognising that providing employees with stability and security in retirement is just as important,” said Alison Brown, executive partner at Herbert Smith Freehills.
Meanwhile, reports suggest plans to bring forward a rise in the state pension age to 68 in the 2030s are being shelved as life expectancy falls and in advance of the general election and worries about the impact on traditional Conservative voters. The state pension age is due to increase from 66 to 67 between 2026 and 2028. It is scheduled to rise to 68 by the mid-2040s, but the Government was reported to be considering bringing that forward to the 2030s.