The Living Wage Foundation has launched the Living Pension Employer standard, a major new programme to tackle low pension saving amongst low-paid workers. The Living Pension is a voluntary savings target for employers who want to help workers build up a pension pot that will provide enough income to meet basic everyday needs in retirement. It builds on the work of the real Living Wage by providing low-paid workers with stability and security now, and in the future.
The Living Pension savings target is 12% of a worker’s annual salary, of which the employer pays in at least 7%. This builds on auto-enrolment, where the employer is only required to contribute 3%. The Living Pension savings target can also be implemented as a cash amount of £2,550 a year, based on 12% of a real Living Wage worker’s salary. The employer contributes at least £1,448 to this cash amount.
Research by Resolution Foundation completed in 2022 found that 4 in 5 workers (16 million people) saving into defined contribution schemes, and 95% of low-paid workers, weren’t saving at levels likely to make ends meet in retirement.
Many employers already recognise the challenge of low pension saving and are stepping up to support their employees. The Living Pension launches with 6 employers signed up to the standard: Aviva; Phoenix Group; Herbert Smith Freehills; Good Things Foundation; Wealthify; and Citizens UK.
The announcement comes as new Living Wage Foundation research finds that over half of pension savers feel they’ll never be able to retire.
A benefit of the LPE scheme is that it provides employers with more flexibility in managing their retirement plans. Because the scheme is designed to be more flexible, employers can adjust the benefits offered to employees as needed. For example, if the economy is performing poorly, employers can reduce contributions to the retirement accounts of employees. Conversely, if the economy is performing well, employers can increase contributions to employees’ retirement accounts.
The LPE scheme is also beneficial for employers because it can help them attract and retain talented employees. With more employees looking for flexibility and control over their retirement savings, companies that offer the LPE scheme are likely to be more attractive to potential employees. Additionally, because the scheme is designed to be more flexible, it can help employers better manage their retirement costs over time.
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