The Living Wage Foundation has today launched the new Living Pension Employer standard. The Living Pension is a voluntary savings target for employers who want to help workers, especially those on low pay, to build up a sufficient pension pot for retirement.
The intention is that all Britons will have enough income to at least meet the basic everyday needs in retirement.
The Living Pension savings target is 12 percent of a worker’s annual salary, with an employer paying in at least seven percent.
Such a move would build on auto-enrolment, where the employer is only required to contribute three percent.
The Living Pension savings target can also be implemented as a cash amount of £2,550 a year, based on 12 percent of a real Living Wage worker’s salary. The employer would contribute at least £1,448.
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Katherine Chapman, director of the 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.
“Over the last ten years, the Living Wage campaign has grown in strength and numbers. Now paid by over 12,000 employers, it delivers essential pay rises to over 450,000 workers every year.
“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.”
The move to establish a Living Pension comes as most current pension savers feel they will never be able to retire, according to the latest research.
Over half of pension savers asked said they believe they will never be able to retire, while 64 percent feel they will need to work several years beyond retirement age.
Resolution Foundation research from 2022 appears to support this notion, finding four in five workers, and 95 percent of low-paid workers were not saving at levels likely to achieve a pension pot meeting basic needs in retirement.
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To meet this savings level, the foundation stated a worker saving at the auto-enrolment minimum levels would need a pre-tax salary of £38,000.
However, matters have also been exacerbated by the ongoing cost of living crisis, which is causing many to cut back on their pension contributions.
Polling from the Living Wage Foundation found nine percent of those asked had stopped or cut their contributions in the last six month.
Some eight percent said they were planning to cut contributions in the months ahead.
Phil Brown, director of policy at the People’s Partnership, welcomed the move, but also exercised caution.
He said: “When six in 10 people aren’t saving enough to live on in retirement, we absolutely support the intention behind initiatives like this, but multiple adequacy measures could be confusing for savers.
“We believe there should be an industry standard agreed, bringing together the fantastic work of organisations like the Living Wage Foundation and the Pensions and Lifetime Savings Association.”
