The Living Wage Foundation (LWF) has launched the Living Pension Employer standard, a major new programme addressing low pension savings among low-paid workers.
The Living Pension offers voluntary savings targets for employers who want to help workers build a pension pot that will provide enough income to meet basic everyday needs in retirement.
The target is 12% of a worker’s annual salary, with the employer paying in at least 7%, which builds on auto-enrolment, where the employer is only required to contribute 3%.
Cost of living crisis
The launch of this programme comes as new research finds that over half of pension savers feel they’ll never be able to retire, and one in ten have cut contributions as the cost-of-living crisis bites. This research further highlights the urgent need for such an initiative to provide low-paid workers with stability and security now and in the future.
Six employers have already adopted the Living Pension Employer standard: Aviva; Phoenix Group; Herbert Smith Freehills; Good Things Foundation; Wealthify; and Citizens UK.
Leading by example
Aviva has been working closely with the LWF from the outset to develop this accreditation and test the proposals through its employee pension schemes. As a result, Aviva has opted to increase its default pension contribution rates. This means that from July 2023, Aviva will automatically enrol new starters on a pension contribution of 14%, of which 10% is contributed by Aviva and 4% by the employee.
Danny Harmer, Chief People Officer, Aviva, said: “By adopting the Living Pension and paying the real Living Wage, organisations can help their people balance saving for tomorrow with living for today.
“Aviva is proud to be amongst the first companies to offer the “Living Pension” to our employees and, as one of the UK’s leading pension providers, we are raising awareness with our clients too, so that more people have a decent standard of living when they retire.”
Meeting basic needs
Struggling to make ends meet as living costs soar, workers cannot save enough for retirement. Low pension saving levels are a long-standing issue. The current cost-of-living crisis exacerbates the problem, leaving many workers unable to prioritise pension saving, which risks storing up a future crisis of millions unable to afford even the basics in retirement.
The Living Pension offers a way out by encouraging employers to do more to help their workers build a pension pot that meets basic everyday needs in retirement, providing stability and security for workers now and in the future.
The Living Pension targets a significant problem: research by the Resolution Foundation completed in 2022 found that four in five workers – 16 million people saving into defined contribution schemes – and 95% of low-paid workers weren’t saving at levels likely to make ends meet in retirement.
Employers who recognise the challenge of low pension savings now have in the Living Pension programme a way to step up and support their employees. It provides workers with stability and security in retirement, which is just as important as ensuring that staff are looked after while working for their employers. The programme is supported by the Pensions and Lifetime Savings Association (PLSA).
The Living Pension is an important initiative that could make a real difference in the lives of low-paid workers. The launch of this programme is a clear message to employers that they have an important role to play in ensuring that their employees save enough for retirement. As more companies adopt the Living Pension, more workers will have access to a pension that provides them with stability and security in retirement, giving them peace of mind and confidence about their future.