Paying into a pension should be made compulsory according to at least one leading think tank.
With the average pension pot worth approximately £33,000 and people live longer, there is growing concern that people are not saving enough for their retirement. Now Policy Exchange, a think tank linked to the Conservative party, are calling for the Government to make saving for retirement compulsory.
End Automatic Enrolment opt-out
In an effort to improve retirement incomes, all workers aged over 22 and earning more than a set level, £9,440 in the current tax-year, will be automatically enrolled into a workplace pension over the next few years. However, because it is possible for workers to opt-out after they have been automatically enrolled, the think tank believes the new measures don’t go far enough.
So far around 10% of workers have opted out after being automatically enrolled, lower than the number expected. However, experts believe this figure will rise as smaller employers begin to comply with the new legislation.
Low contribution levels
There is also concern that the contribution levels, which start at 2% and rise to 8% in 2018, are too low to fund a comfortable retirement. We have previously written about the dangers of automatically enrolled workers becoming complacent and believing that the contribution levels will meet their income needs in retirement – read more about this by clicking here.
Policy Exchange’s James Barty said: “With an ageing population, putting money aside for later life should be seen in the same context as National Insurance contributions, taxes and even education – an obligation that falls on everyone in society.”
“Help to Save will prevent the state from having to pick up the tab for people who haven’t put aside enough money for later life.”