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Workplace pension savers back higher contributions

18 November 2016

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More than half the people currently saving into a workplace pension would be willing to contribute more, according to new research by Aviva.

The survey of 2,000 people, who are currently paying into a workplace pension, found 52% said they would contribute more than 5% of their salary themselves, with almost a third (29%) saying they would pay in 10% or more.

Under auto-enrolment, the current minimum pension contribution for an employee and their employer is 2% of salary (including tax relief), rising to 5% in 2018 and 8% in 2019.

Employers are also willing to contribute more, according to research among Aviva's larger workplace pensions clients.

It found two thirds (68%) of larger employers surveyed said they would be willing to pay more than the 3% of an employee's salary that will be asked of them in 2019.

One in seven said they would be willing to contribute 10% or more to their employees' pensions.

Despite a perceived resistance to AE by smaller businesses, 43% of Aviva's small or medium sized (SME) clients surveyed also said they would be willing to pay in more than the minimum.

Andy Briggs, Aviva UK and Ireland Life CEO, emphasised the importance of continuing to develop auto-enrolment.
"Auto-enrolment has undoubtedly had a positive impact on the pensions landscape in the UK, but we are just at the start of this journey," he said.

"Now that AE is embedded in over 250,000 businesses we need to build on the success we've had already and work out exactly how we're going to crack this pension savings challenge."

Briggs said average contribution rates in DC pensions schemes have consistently fallen since 2012, as employers and employees adopt the minimum level of contribution by default.

He stressed the need for greater contributions to provide adequate funds for retirement for millions of savers.

"The government, regulators, the pension industry and employers now need to work together to address this and give as many people as possible the best chance of a happy and prosperous retirement."

First published 18.11.2016

Lindsay.sharman@wilmingtonplc.com