The Department of Work and Pensions have rejected calls from MPs to draw up a timetable to increase minimum AE pension contributions from both employees and employers.
The influential Work and Pensions Select Committee has called for such a step as part of its review of the pension freedoms rules. However its its response to the select committee’s report — “Protection pension savers—five years on from the pension freedoms — the government said there were no plans to increase AE levels in the near term.
Broadstone’s head of policy David Brooks says that if contributions are not going to be increase the government needs to be honest with savers about how much they need to save to achieve a good standard of living in retirement. He points out that sticking minimum levels may create a false sense that savers are on track for an adequate reitremenet, when this is unlikely to be the case for many people.
Brooks adds: “Auto-enrolment contributions are currently not enough for a financially secure and comfortable retirement. Therefore, the failure to set out a timetable for increasing contributions risks a whole cohort of pension savers sleepwalking into retirement destitution under the impression they will be guaranteed a good standard of living.
“While many employers and individuals will be feeling difficult financial pressures, it is vital that the government is honest about how much people need to be saving into their pension over the entirety of their accumulation journey.
“If the government isn’t going to be increasing minimum contribution levels in the near-term, at the very least we need a change of rhetoric to demonstrate the importance and urgency of building up adequate pension savings.”
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