A voluntary pensions target described as the Living Wage’s little brother is being launched today (21 March), creating a new contribution benchmark to ensure adequate retirement income for workers.
The Living Pension has been developed as a voluntary pension savings target for Living Wage employers and has been independently calculated to provide enough income to meet every day needs in retirement. It will be open to all accredited Living Wage employers from March 2023.
To become a Living Pension employer, organisations must provide a Living Pension savings level which equates to 12% of a full-time real Living Wage salary, of which at least 7% must come from the employer.
Ten years since launch the Living Wage campaign is now paid by more than 12,000 employers and 450,000-plus workers. The Living Pension is designed to build on this by encouraging employers to do more to help their workers build a pension pot that meets basic everyday needs in retirement.
Aviva has opted to increase its default pension contribution rates to make it a Living Pension employer. From July 2023, Aviva will automatically enrol new starters on a pension contribution of 14%, of which 10% is contributed by Aviva and 4% by the employee.
Katherine Chapman, director of the Living Wage Foundation, said: “Low pension saving levels are a long-standing issue and our research shows that workers are worrying about an uncertain future. The current cost-of-living crisis is exacerbating the problem. Struggling to make ends meet as living costs soar, many workers are unable to prioritise pension saving, which risks storing up a future crisis of millions unable to afford even the basics in retirement.
Andy Curran, chief executive of Standard Life, part of Phoenix Group, commented: “It’s critical that people are saving enough towards their retirement, and we know that employers have an important role to play in ensuring that the right foundations are laid for their employees’ retirement. As the UK’s largest long-term savings and retirement business, Phoenix Group is proud to be one of the first employers in the UK to sign up to the Living Pension accreditation which is a really good initiative. We urge other businesses, who can, to also sign up to help ensure everyone can have enough income to meet their everyday needs in later life.”
Alison Brown, executive partner at Herbert Smith Freehills, said: “The cost-of-living crisis has highlighted the stark difficulties faced by far too many individuals who struggle to manage financially on a daily basis. These challenges could get worse, with many people not saving enough for their future. Being a responsible employer is about more than ensuring staff are looked after while they work for you; it is about recognising that providing employees with stability and security in retirement is just as important.”
“We are delighted to have supported the Living Wage Foundation in developing the new Living Pension standards and are proud to be one of the first companies in the UK to be accredited as providing our staff with access to a Living Pension.”
Danny Harmer, chief people officer at Aviva, said: “By adopting the Living Pension and paying the Living Wage, organisations can help their people balance saving for tomorrow with living for today. Aviva is proud to be one of the first companies to offer the ‘Living Pension’ to our people and, as the UK’s leading pension provider, we are encouraging our clients to do the same, so that more employees can have a decent standard of living when they retire.”
Adam Barlow, assistant director of finance at the Good Things Foundation, commented: “At Good Things Foundation, we are very proud to have signed up to a Living Pension, as we want to provide security and stability for our amazing staff not just now, but in the future. We believe it’s important to ensure our staff receive a pension that meets the real cost of living and delivering the Living Pension truly demonstrates our position as a caring employer with a market-leading offer.”
Andy Russell, CEO, Wealthify said: “We’re happy to commit to the Living Pension to ensure that all our employees receive the support needed to live a comfortable and fulfilling retirement. It is essential to Wealthify that we ensure financial wellbeing for our people.”
Mubin Haq, Chief Executive of abrdn Financial Fairness Trust said: “Good progress has been made on pensions in recent years, especially the introduction of auto-enrolment and the triple-lock. Some might think job done, but we are storing up future problems as millions are not saving enough towards their retirement: four in five workers on defined contribution schemes are falling short of what they need to have a decent standard of living in old age. A living pension provides employers with a model to do the right thing and ensure their workforce are not facing hardship in the future.”
Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association (PLSA) said: “I am very pleased to support the Living Pension which seeks to encourage better pensions and higher employer contributions, especially for employees on a modest income. The new initiative, alongside existing measures like the Retirement Living Standards and the Pensions Quality Mark, helps employers and employees identify good provision.”
Doug Brown, CEO UK and Ireland Life, Aviva, said: “The Living Pension accreditation, combined with the incoming changes to auto-enrolment, could make a real difference in levelling up pensions for younger workers, part-time workers – who are often women – and those with multiple lower-paid or part-time jobs.
“This is a voluntary savings target, recognising that not all employers will be able to make these changes right now, especially when faced with current economic challenges. It is an important step forward in helping employers provide a living income for their people during their working lives and beyond.”
Phil Brown, director of policy for the People’s Partnership, funder of The People’s Pensions, said: “When six in 10 people aren’t saving enough to live on in retirement, we absolutely support the intention behind initiatives like this, but multiple adequacy measures could be confusing for savers. We believe there should be an industry standard agreed, bringing together the fantastic work of organisations like the Living Wage Foundation and the Pensions and Lifetime Savings Association.”