The majority of business leaders believe auto-enrolment contributions should be raised, says Standard Life.
New research from the Standard Life Centre for the Future of Retirement found 43% of business leaders think contributions should be raised, compared to 36% who believe it should remain at current levels. A much smaller percentage (6%) say the rate should be lowered and 8% believe it should be removed and set by individual employers.
The polling of 500 business leaders found employers would like to be able to do more for their employees. Among those considering raising pension contribution levels in the next five years, 37% say their motivation is to support employee wellbeing and long-term financial security, while 37% also say they believe it is their responsibility to help their employees save more for retirement and 34% see it as a way to help retain and hire staff.
If pension contributions were to be increased, 73% would support a phased timetable for gradually raising contribution levels, while a similar proportion (72%) would support the flexibility to pause, slow or ‘opt-down’ increases to contribution levels during economic downturns.
These options have more support than a shorter six to 12-month implementation timetable, which 57% would support.
The findings come as pressure grows on people to save for later life amid fears of a brewing retirement income crisis. While the introduction of auto-enrolment has proved successful, government estimates suggest that more than 15 million working-age people are heading for an inadequate retirement income.
Standard Life said its research explored whether there was scope for changes within the current savings framework. Three fifths (61%) of business leaders say they are likely to consider auto-escalation, 59% ISAs linked to their payroll and 49% sidecar savings to increase employee pension saving as an alternative to salary sacrifice.
Employers were also asked about other ways they could boost pension provision and engagement. A clear majority of business leaders (75%) would consider lowering the age threshold for default auto-enrolment contributions in their organisation from 22 to 18, while seven in 10 (70%) would consider lowering the income threshold.
Catherine Foot, director of the Standard Life Centre for the Future of Retirement, said: “The success of auto-enrolment is to be celebrated, but it’s clear more needs to be done to support low-to-middle earners, in particular, with minimum contribution levels giving people a false sense of security that they are saving enough for the retirement income they need.
“Employers recognise the important role they must play with many doing more than the minimum, alongside supporting further change. Ultimately, ongoing inaction will mean costs will be borne by government and society further down the line. If changes are to be introduced, we need to ensure broad support. It’s also crucial that employers have time to prepare with a clear roadmap for change – this is about evolution not revolution to improve pensions adequacy.”
