A new pensions standard to help workers build up adequate retirement savings has been launched by the Living Wage Foundation.
The living pension is a voluntary savings target for employers who want to support workers in building up a pension to help meet basic everyday needs in retirement.
The savings target, which particularly aims to help lower earners, is 12% of a worker’s salary, of which the employer pays in at least 7%.
Under current automatic enrolment rules, a minimum of 8% of eligible earnings must be paid into a workplace pension, with the employer paying in at least 3% and employees’ contributions and tax relief also making up the pot.
Employers who sign up to the voluntary pension standard can refer to themselves as accredited living pension employers and add the living pension logo to their website and other publicity materials, helping employees to identify which firms are offering this.
A survey of more than 3,000 working-age adults who have recently been saving into a pension found that more than half (56%) feel they will never be able to retire and 8% plan to cut their contributions in the months ahead, as everyday living costs bite.
Nearly two-thirds (64%) feel they will need to work several years beyond retirement age, and 37% are not confident that they are saving enough to meet their basic needs in retirement, according to the research carried out by Savanta in February.
Some employers have already signed up to the new retirement standard, including Aviva, Phoenix Group, Herbert Smith Freehills, the Good Things Foundation and Wealthify.
The Living Wage Foundation is already known for its campaigning around the real living wage, which is voluntarily paid by thousands of businesses. The foundation said the living pension builds on this work, by helping to provide stability and security for workers in retirement.
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.”
The new initiative… helps employers and employees identify good provision
Nigel Peaple, PLSA
Danny Harmer, chief people officer at Aviva, said: “By adopting the living pension and paying the living wage, organisations can help their people balance saving for tomorrow with living for today.”
Andy Curran, chief executive of Standard Life, part of Phoenix Group, said: “It’s critical that people are saving enough towards their retirement, and we know that employers have an important role to play in ensuring that the right foundations are laid for their employees’ retirement.”
Alison Brown, executive partner at professional services business Herbert Smith Freehills, said: “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.”
Adam Barlow, assistant director of finance at charity the Good Things Foundation, said: “We believe it’s important to ensure our staff receive a pension that meets the real cost of living.”
Andy Russell, CEO at investment services business Wealthify, said: “It is essential to Wealthify that we ensure financial wellbeing for our people.”
Mubin Haq, chief executive of abrdn Financial Fairness Trust, said: “A living pension provides employers with a model to do the right thing and ensure their workforce are not facing hardship in the future.”
Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association (PLSA), said: “I am very pleased to support the living pension, which seeks to encourage better pensions and higher employer contributions, especially for employees on a modest income.
“The new initiative, alongside existing measures like the retirement living standards and the pensions quality mark, helps employers and employees identify good provision.”
Phil Brown, director of policy for the People’s Partnership, which provides the People’s Pension, said: “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.”
