The government should urgently consider mandating for higher pension contributions after figures revealed that private renters are three times more likely than homeowners to fail to reach a minimum standard of living in retirement.
Pensions consultancy Broadstone found that 25% of renters are unlikely to achieve the Pensions and Lifetime Savings Association’s (PLSA) definition of a minimum income standard of £12,800 a year, compared with 8% of homeowners. Under the PLSA’s “moderate” retirement income standard of £23,300 a year, this jumped to 71% of renters being unlikely to reach this level, compared with 45% of homeowners.
Broadstone’s calculations came as the government backed a Private Members’ Bill by Stoke-on-Trent North MP Jonathan Gullis. It will see auto-enrolment expanded to employees as soon as they reach 18, rather than the current age of 22. It will also widen the band of earnings on which workers, employers and the government will pay at least an 8% contribution into pensions (currently £6,240-£50,270). These moves were first proposed by a government review in late 2017.
Damon Hopkins, Broadstone head of defined contribution workplace savings, said the figures illuminate the vast wealth disparities among the two groups in the UK and expose “the soft underbelly of auto-enrolment”. He added: “The government’s proposals to extend auto-enrolment rules by reducing the minimum age to 18 and removing the lower earnings limit are small steps in the right direction but mandating higher pension contributions has to be an urgent priority.”