The Association of British Insurers has called for pension changes to ensure more people are saving enough money for their retirement.
People are not saving enough for their pensions and not enough people are eligible for auto-enrollment, according to a report by the Association of British Insurers which wants to see the threshold for auto-enrollment lowered and the amount paid increased.
The ABI’s report, ‘Automatic Enrolment: What Will The Next Decade Bring?’ says that automatic enrolment has achieved its target of increasing participation by bringing over 10 million more people into workplace pension schemes.
However, despite the huge increase in the number of pension savers, it says people still aren’t saving enough for retirement. To address this gap, the ABI recommends gradually increasing the minimum contribution rates from 8% to 12% over the next 10 years, with the new minimum contribution split evenly between employers and employees. The report suggests a timeline, with changes starting to be introduced after 2025.
It also recommends that savers should have flexibility, including allowing them to ‘opt-down’ to 10%, for instance, due to financial problems. Alternatively, it says a minimum contribution could be set at 10% with the option to ‘opt-up’ to 12%.
The ABI also urges the Government to bring forward the commitments it has already made to extending automatic enrolment, by lowering the age threshold from 22 to 18 and reducing the earnings threshold so that contributions are made from the first pound earned.
Dr Yvonne Braun, Director of Policy, Long Term Savings and Protection, at the ABI, said: “The huge success of automatic enrolment reflects a long-term plan based on consensus between political parties, industry and employers. We need the same approach now to determine the future of the policy, ensuring more people are included and are saving enough, with the right level of flexibility. Our report describes the key steps for the next chapter of automatic enrolment and sets out specific recommendations to adapt and evolve the policy.
“We also need to see more people engaging with their pension savings, which is why the industry has come together to launch the Pensions Engagement Season. By paying more attention to their pension, people will be able to understand if they’re saving enough and what actions they might need to take if they’re not.”