Retirement Income Adequacy: Generation by Generation

Retirement Income Adequacy: Generation by Generation’ reveals that automatic enrolment will deliver a real improvement in the retirement outcomes of millions of people in the UK, but there is still room for improvement. 

This research finds that, of the 25.5 million people in employment:

  • 1.6 million people, are still at high risk of falling short of a minimum income standard (MIS) in retirement; and
  • 13.6 million people, are still at risk of not meeting their target replacement rate (TRR).

It is clear from our analysis that minimum contributions under automatic enrolment need to increase to at least 12%. The precise level, the timing of the change and the balance between employer and employee contributions are issues which need to be fully thought through in the light of the effects of increases in contributions due in 2018 and 2019.

We believe that the success of automatic enrolment to date has been underpinned by wide consensus and support as established by the Pension Commission.  This report recommends that, to ensure the next phase of automatic enrolment builds on the success of the first, the Government should create an independent commission with a remit to:

  1. Review existing measures of adequacy and make recommendations for a national standard, or standards, which reflect the changing nature of retirement.
  2. Make recommendations for increasing minimum contribution levels to at least 12% of qualifying earnings, including how and when this change should be made, and how it should be divided between worker and employer contributions.
  3. Make additional recommendations to improve the situation of older savers who have less time to benefit from an increase in contribution rates.

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