This could be achieved by pushing employers to reward saving over the minimum contribution rate in some way, and by introducing a method of auto-escalation, according to the institute.
In addition, it recommends that the DWP consider removing the earnings trigger for when maximum contributions are payable, in order to strike a balance between the ability for those on lower incomes to save, and the risk of them losing out on tax relief and employer contributions.
IFoA president, Colin Wilson, said: “The IFoA has first-hand knowledge of the impact of AE pensions, and of the wider issues surrounding pensions adequacy in the UK.
“We recently conducted a survey in which a worrying 42% of respondents said that they had done nothing to prepare for their retirement.
“This is clearly unsustainable, and we therefore call upon the government to do everything they can to ensure that everyone who retires in the UK does so with adequate provision for their old age.”
Another key feature of the IFoA’s recommendations is for the DWP to remove the AE age criteria so that individuals can save towards their retirement at the point they enter the workforce, regardless of age.
This would give early savers a greater opportunity to benefit from investment returns, and would align with other government initiatives, such as the recruitment and retention of older workers, as it would provide an additional financial incentive to continue employment.
“Government, pension providers, employees and employers all have a role to play, and that is why our submission to the review of AE contains recommendations to allow maximal contributions, opportunity to benefit from investment returns, and access to pensions tax relief,” Wilson continued.
“The demographic trend towards an ageing population means that this issue will only become more acute with time.
“Improving the adequacy of retirement savings is an achievable goal, and our recommendations detail the methods that DWP could use to ensure that all savers are able to save effectively for their old age.”
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