MPs say that automatic pension enrolment is fundamental to funding a new era of retirement, which is becoming increasingly reliant on private rather than public savings.
According to a new report, more than 12 million Britons are not saving enough for their desired retirement lifestyles – therefore contributions need to be increased to make up the shortfall.
MPs have warned that to avoid people opting out of auto-enrolment, increases should be introduced ‘subtly’, for example when a worker gets a pay rise. This would also ensure that workers do not see a reduction in their incomes as their savings increase.
The issue with the country under-saving will become a huge concern once the pension’s triple lock becomes too expensive for the state, and is subsequently scrapped, MPs have said.
“If (the triple lock) is maintained in the longer-term, the state pension will rise relative to earnings indefinitely. This is clearly unsustainable,” the MPs said in their report into household finances, noting that the existing system has only been guaranteed to stay in place until the end of this Parliament.
“However, according to the Government’s analysis, replacing it with earnings-uprating could result in a large rise in the number of under-savers,” it said.
Due to this, MPs argue that “the next auto-enrolment review should explore the options for making up with private savings the shortfall that could result if the triple lock were abandoned in future.”