Pensions: Workers not saving enough for retirement as cost of living crisis bites

·Finance Reporter, Yahoo Finance UK
·3 min read
Rising prices are keeping workers from contributing more towards their pensions. Photo: Getty

Britons who pay into a workplace pension are not saving enough to get by when they retire but can’t afford to contribute more because of the cost of living squeeze, MPS have been told

Anna Mowbray, research and policy officer at Community Trade Union, told the work and pensions committee that workers are worried about their future pension but the biggest concern now is facing soaring energy and food bills.

“Given the current cost of living crisis that people are facing there is that real temptation to say: ‘I need money in my pay packet now. I reckon it is important to save more for my future but I’m struggling here and now today,'” she said.

A recent survey showed that just over a quarter of Britons who pay into a workplace pension worry that they are not saving enough to get by when they retire.

Low-income households, women and people in their thirties and forties are the most concerned, according to a survey of 2,000 adults by the Pensions and Lifetime Savings Association.

Read more: Cost of living payment: 8 million to get first sum from 14 July

“There is an element of nanny state because if you walk away from the debate on the basis that people would rather have the money in their pockets, we are just going to have a stampede of people getting to a certain age where they can’t work anymore and [are] totally reliant on a state pension,” Terry Pullinger, deputy general secretary at the Communication Workers Union (CWU), told MPs.

Jack Jones, policy and campaigns support officer at Trade Union Congress (TUC), called for contributions to rise to 15%.

“A 10% contribution from the employer while maintaining a 5% expectation from the employee would give you that 15% contribution which is quite widely accepted as what you need as an average worker to get a decent pension,” he said.

“It is an ambitious target. If we ended up somewhere where you’ve got 7% employer contribution and a 5% employee contribution, that would probably give us a base as a statutory minimum,” he added.

Mombray agreed that placing more of the burden on employers “was the right way to go”.

Auto-enrolment, which requires that both employees and employers pay into a workplace pension, was launched ten years ago.

Under auto-enrolment minimum contributions are currently 8% – split between 5% from the employee and 3% from the employer.

Many employers stick to auto-enrolment minimums, but some are willing to contribute more which is often called an employer match.

Read more: Bank of England set to raise UK's interest rates to 1.25%

MPs were also warned that many workers are missing out on employment benefits such as a pension amid a rise in “bogus self employment”.

Pullinger warned that “bogus self employment” in the gig economy like uber drivers, where people should be classed as workers or employees instead of self employed, will lead to old age poverty.

“It is going to be a stampede to old age poverty in this country if people don't do something,” he said.

“It isn't just what type of scheme you have, it's got to be about employers and the employment model because that's only become popular over the last few years with the bogus self employed model.”

Around 4.4 million people are working in the gig economy, according to research by the TUC.

Watch: When should I start paying into a pension?