As the effects of the cost-of-living crisis are starting to abate, many of those saving for a pension are supportive of paying more in, according to a survey.
Ahead of its annual conference in Liverpool, the Pensions and Lifetime Savings Association (PLSA) surveyed 2,100 people including 1,588 non-retired adults.
Of those yet to retire, more than half (51%) supported increasing the minimum contribution level for auto-enrolment from 8% of salary to 12%.
Respondents also expressed a preference for employers to shoulder more of the cost of increases. Nearly half (45%) said contributions should be split equally between workers and employers, while 43% said employers should pay more.
The survey found an average contribution level of 9% of salary among those respondents paying into a workplace pension. One in six (17%) said their total contribution was 12% or more.
It also identified that different groups of people could afford higher contributions at different times. A quarter (24%) said they could pay more now, while 25% could not do so now but said they could over the next couple of years. A further 18% said they could pay in more over a longer timeframe.
The PLSA said these findings highlighted “the importance of pension adequacy being included in the second stage of the government’s current review of the pensions system”.
Nigel Peaple, chief policy counsel at the PLSA, said: “It’s essential that we act now to ensure people have enough savings for a secure retirement. This means maintaining the value of the state pension and gradually increasing minimum auto-enrolment contributions from 8% to 12% over the next decade.
“In doing so, contributions should be evenly split between employers and employees, helping to ease the concerns of UK savers.”
Cost of living
Headline inflation figures have fallen over the past two years. The consumer price index has declined from a high of 9.6% in October 2022 to 3.1% in August this year.
A quarter (27%) of respondents to the PLSA’s survey said they had seen an improvement in their financial position in the last 12 months – although a third (34%) said they were financially worse off than this time last year.
The proportion of survey respondents who reported having to make cutbacks or reduce expenditures fell compared to last year, from 48% to 41%.
Pension contributions were the least likely expense to have been cut, the PLSA found, with 13% saying they had reduced or cut private pension contributions and 11% saying they had done the same for their workplace pension.
“This could reflect the importance people place on maintaining long-term savings for retirement, even amid short-term financial pressure,” the PLSA said.
Other concerns
Respondents also highlighted concerns that the state pension was unlikely to provide enough income to support a comfortable retirement. Nearly three quarters of those surveyed said the triple lock should be maintained.
The PLSA also asked savers about their attitude to investing in UK businesses, in line with the government’s drive for investment in “productive finance”.
Two in five (39%) of respondents said they opposed the government dictating where pensions are invested, but many still supported socially responsible investment.
This included 44% of respondents who supported lending money to help fund public services like the NHS and schools. More than half (54%) said they preferred their funds to support UK companies rather than companies overseas – but getting the best return was more important to most.
“While there is a desire among savers to see pension investments supporting UK companies and public services, this should not come at the cost of lower returns,” Peaple said.
“Achieving the best possible returns must remain the priority, whether those investments are in the UK or overseas. We ask that the government strikes the right balance between supporting domestic growth and delivering strong returns for savers.”
Further reading
Auto-enrolment contributions boost ‘could add £10bn a year’ (25 April 2024)
WTW urges higher default contribution levels to boost saving (29 April 2024)
Living Wage data lends weight to 12% contributions call (9 September 2024)
