The government should increase auto-enrolment contributions to 12 per cent to ensure the next generation of retirees have a good quality of retirement, according to the Personal Investment Management and Financial Advice Association.
The comments are part of the Association’s response to the Pensions and Lifetime Association’s Hitting the Target consultation on achieving adequate outcomes to retirement. Pimfa has warned that currently, auto-enrolment remains a policy based on participation, rather than on adequacy of pension savings.
Therefore, it has warned that if the government is serious about ensuring the next generation of retirees have a good quality of retirement to look forward to, action needs to be taken to not just encourage, but ensure that this will be the case.
As well as calling for minimum auto-enrolment contributions to increase to 12 per cent, Pimfa has also asked the government to provide a level of guarantee that the current pension tax incentive framework remains in place for the medium term at least.
Pimfa senior policy adviser Simon Harrington said: “Automatic enrolment remains the most successful policy intervention for long term savings in generations. However, we need to step back and assess what the policy actually does – this is a policy where success is measured by participation rather than adequacy of saving.”
“As we reach the end of the staging profile next month, it is absolutely imperative that we shift the focus from getting to people to save more rather than save at all. It is not enough to hope that people will save more through voluntary means, all the evidence we have about consumer behaviour suggests that if the default doesn’t change, nothing will change.”
