The government has been urged to legislate now for a phased increase in minimum automatic enrolment (AE) pension contributions from 8 per cent to 12 per cent during the 2030s, with The Investing and Saving Alliance (TISA) warning that further delays risked leaving millions of savers facing inadequate retirement incomes.

In response to the Work and Pensions Committee's (WPC) inquiry into pension adequacy, TISA argued that the government should commit to a clear timetable for increasing contributions, giving employers and employees enough time to prepare for the added costs.

Under its proposed timetable, employer contributions would initially increase by 0.5 percentage points annually over four years, taking total minimum contributions to 10 per cent, split equally between employers and employees at 5 per cent each.

A further two years of annual 0.5 percentage point increases for both employers and employees would then take total minimum contributions to 12 per cent, with each contributing 6 per cent.

TISA stressed that the increases should begin in the 2030s to give businesses and households time to adjust, particularly smaller employers and lower-income workers who could struggle with sudden increases.

Alongside higher contributions, TISA urged the government to implement outstanding AE reforms within the current parliament, including reducing the minimum enrolment age from 22 to 18 and removing the Lower Earnings Limit (LEL) so that contributions are calculated from the first pound of earnings.

TISA head of policy: products and long-term savings, Renny Biggins, said: "AE has transformed pension saving, but getting people into the system is only half the job. For many workers, the current minimum contribution rate simply won't deliver an adequate retirement.

"We cannot afford another decade of delay. The government needs to commit now to a clear timetable for increasing contributions, while recognising that employers and households cannot absorb these costs overnight.

"A gradual, predictable approach would give everyone time to adjust, particularly smaller businesses and lower-income workers who may struggle with sudden increases."

Biggins also stressed the need to progress the outstanding reforms from the 2017 review.

"Nearly a decade has passed since the 2017 review called for AE to start at 18 and contributions to be calculated from the first pound earned," he continued.

"Parliament has already given the government the powers to act - it's time to use them."

Beyond increasing minimum contributions, TISA called for a more flexible contribution structure, arguing that a single minimum rate would not necessarily deliver adequate retirement outcomes for all savers, given differences in earnings, wealth and retirement needs.

It also recommended establishing a timetable for future statutory reviews focused on retirement outcomes rather than contribution rates alone.

Indeed, the group warned that encouraging higher pension saving would also require greater policy stability, particularly amid ongoing uncertainty surrounding the future taxation of pensions.

Biggins concluded: "Saving for retirement is a commitment people make over decades, and we cannot expect them to put more money aside while the rules governing pensions remain subject to constant uncertainty.

"Frequent policy changes and speculation around pension taxation risk undermining confidence at precisely the time we need people to be saving more.

"A stable, predictable pensions framework is essential to giving people confidence that the decisions and sacrifices they make today will support them in retirement."

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