New "living pension" needed to help workers in retirement

The Building A Living Pension report said the living wage campaign has already been successful in encouraging firms to pay their staff wages that deliver adequate living standards

A new "living pension" is needed to help workers enjoy a decent standard of living in retirement, according to a think-tank.

It would help firms ensure that their staff are saving adequately for their later years, the Resolution Foundation said.

The Building A Living Pension report, supported by Aviva, said the living wage campaign has already been successful in encouraging firms to pay their staff wages that deliver adequate living standards.

But workers who only pay in the minimum amounts required under automatic enrolment into their workplace pensions may fall short of saving enough for a comfortable retirement.

Phil Brown, director of policy at The People's Pension, said: Setting out the minimum income needed for a decent retirement will simplify pensions for everyone. The challenge for the pensions industry is to ensure that people understand clearly how much they need to save to reach that minimum standard.

The report said further action is needed to encourage greater saving.

It proposes that firms set new benchmarks for the amounts people should be putting into their pension pot, to help those on low to middle incomes build up adequate retirement savings.

Laura Gardiner, director of the Living Wage Foundation, said: Despite the success of auto-enrolment in spurring a basic level of saving across the workforce, many lower income workers aren't building up the pensions necessary to cover essential costs in retirement.

Responsible employers have a role to play in addressing that challenge, and a new 'living pension' standard is a vital tool for supporting and encouraging them to do so, she said. Such a standard will build on the success of the living wage campaign, which has accredited 7,000 UK businesses committed to supporting workers' everyday needs.

The research suggests that these minimum income standards in retirement range from a weekly income of £209 for a single home-owner, to £445 for a couple in private rented accommodation.

The Foundation said that achieving these retirement income levels would, on average, require a final pension pot of around £70,000.

David Finch, senior research fellow at the Resolution Foundation, said: The real living wage campaign has persuaded thousands of employers of the need to pay a wage that supports decent living standards for their staff today. The rollout of auto-enrolment has got millions more workers saving into a pension, and our proposal would build on its success.