Plea for higher minimum contributions to occupational pensions in the UK.

VS – 10/2021

The Chair of the UK Pensions and Lifetime Savings Association (PLSA), Emma Douglas, argues that minimum contributions to occupational pensions in the UK should be increased to twelve per cent (six per cent each for employers and employees) by 2030. Only in this way could an adequate pension be made possible. Currently, the minimum contributions are eight per cent (three per cent for employers and five per cent for employees).

Automatic inclusion in the occupational pension scheme - a success story

The automatic inclusion of employees in the occupational pension scheme, which was adopted in the UK in 2008 and fully implemented by 2018, combined with the possibility of opting out, has significantly boosted the spread of occupational pensions. Today, 10 million additional employees are entitled to occupational pension.

Adequate occupational pensions - the new slogan

Now that occupational pensions have become widespread, the focus must be on their adequacy. In addition to the minimum contribution level being too low, the PLSA sees the lower income limit of GBP 10,000 as problematic. This leads to inadequate protection of low earners. These include, in particular part-time workers, the majority of whom are women.

Therefore, the PLSA requires that contributions be paid from the first pound of earnings. It is also important to pay into the occupational pension during the entire employment phase as far as possible. Therefore, the PLSA is proposing to lower the age limit for automatic inclusion from the current limit of 22 years to 18. The PLSA believes that these measures are necessary to ensure that as many people as possible in the UK receive a decent pension that secures their standard of living.

In order not to increase the costs for companies and employees in the low wage range too much, the PLSA proposes the option of a low contribution rate for them. A sort of opt-down mechanism for employees.