Think tank floats lower income-focused retirement framework

The Living Wage Foundation is set to use the report findings to develop a pilot for a future living standard equivalent to the national living wage campaign

A pension benchmark for future living standards is necessary and feasible if enough attention is given to formulating an accreditation that will work for both employers and employees, the Resolution Foundation says.

In its Building a Living Pension report - released in conjunction with Aviva - the think tank looks at how the pension savings gap for low-to-middle income families could be closed through the introduction of a new ‘living pension' accreditation standard.

The campaign organisation, the Living Wage Foundation, is set to use the report findings to develop a pilot for a future living standard equivalent to the national living wage campaign, which provides focus on the current living standards of low-paid workers.

The report states there is "a clear need for a living pension standard to encourage and reward employers going beyond auto-enrolment minimums". It added employees - particularly those on lower incomes - also need reassurance that their workplace pension is designed to deliver "a decent standard of living" in retirement.

If a new living pension accreditation standard is created, it will be an exciting step forward for pension saving. It will be clear and simple - calculated by organisations independent from the pensions industry that have extensive experience in encouraging building a living pension, Aviva chief executive of UK savings and retirements Lindsey Rix said.

Not only will a living pension standard improve confidence in workplace pensions, but it could also significantly improve pension outcomes, Rix said.

The current living wage calculation outlined in the report assumes individuals have variable earnings patterns at different stages in life. Earnings trajectories will instead be used in the new Living Pension calculation as a simpler way of representing total earnings over individuals' lifetimes.

The report notes that the Living Pension method must be easy to update and reassessed regularly to reflect the latest data, policies, and societal expectations.