The Government is being urged to ‘think big’ about retirement savings. According to former Pensions Minister turned consultant, Steve Webb, a long-term plan is required, with experts warning that 8% of earnings might not be sufficient to ensure a comfortable retirement income.
Under existing auto-enrolment rules, employers and employees alike must make regular payments towards a pension scheme, determined by compulsory minimum contribution levels. The rate of 8% is divided between employers (3%), employees (4%) and state tax relief (1%). To be eligible, it is necessary to earn somewhere between £6,240 and £50,270.
Further evidence has been produced by pension provider Scottish Widows, whose research found that more than a third of people with ‘defined contribution’ workplace pensions are at serious risk of not being able to guarantee a basic standard of living after retirement.
Amidst continuing pressures on the cost of living, and with employers facing a £25 billion increase in National Insurance contributions, attention has turned to whether the minimum pension contribution for employees should be increased to 12%. Analysts in the pensions industry have urged the Government to consider the long term and plan accordingly, giving businesses time to adapt to a new regime. Similarly, it is hoped focusing on the issue now will galvanise people of working age to better prepare for the future.
For people retirement planning in Cheshire or elsewhere, there is therefore a significant incentive to engage with their pensions earlier in their careers in order to put their minds at rest later in life.
