A hybrid approach to auto-enrolment (AE) could help improve adequacy at retirement, particularly in light of forthcoming changes to the state pension triple lock, according to London Economics partner, Carl Emmerson.

Speaking at the Pensions UK Annual Conference on a report commissioned by People’s Pension, Emmerson highlighted the need for reform to AE to support lower earners and improve under-saving among middle earners.

While Emmerson recommended an increase in default minimum AE pension contributions, he noted that people in different earnings cohorts had different priorities, and therefore needed different approaches.

For those earning below £25,000, Emmerson suggested retaining a lower qualifying earnings threshold to protect lower earners from saving too much under higher default contributions, and for non-contingent employer contributions from the first pound to be considered.

Meanwhile, for those earning between £25,000 and £65,000, Emmerson recommended a phased increase in the default rate, such as up to 12 per cent of qualifying earnings, with the option to opt down to 8 per cent.

For those earning over £65,000, Emmerson suggested raising the upper earnings threshold for AE to around £65,000 and indexing it to earnings.

“Successful pension outcomes really depend on having labour and housing markets that work well for all,” Emmerson added.

“Lots of the inequalities you see in pension outcomes are a factor of those inequalities and those markets not working well.

“Where we see those problems, the new Pensions Commission should be pointing them out very loudly.

“What I worry about is stretching the pension system to try and fix problems that are probably best fixed elsewhere in the system.”

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