Despite the “enormous” success of the UK’s auto-enrolment policy, minimum contributions need to be raised from 8% to 10% to counter inadequate pension saving by the British public, the Association of British Insurers (ABI) has warned.

The ABI’s report “Automatic enrolment: what will the next decade bring?” examines the success of auto-enrolment (introduced in 2012), identifies remaining challenges, and sets out recommendations to drive up pension engagement, given that five years after the last significant review, there is still no roadmap for the next few years.

The report affirmed that auto-enrolment has dramatically increased the numbers of people saving for a workplace pension, from 47% of the workforce just before it was introduced, to 79% at present.

However, workers such as those earning less than £10,000 (€11,700) a year, and the self-employed, are not eligible to join the scheme.

Furthermore, millions of people contribute no more than the statutory minimum of 8%, when according to the Pensions Commission, the resulting pension, plus their state pension, would deliver only around half an adequate income in retirement.

To address this gap, the ABI recommends gradually increasing minimum contribution rates from 8% to 12% over the next 10 years, with the new minimum contribution split equally between employers and employees. The report suggests the changes should start being introduced after 2025.

It also recommends giving savers flexibility, including allowing them to “opt-down” to a 10% minimum. Alternatively, a minimum contribution could be set at 10%, with the option to “opt-up” to 12%.

The ABI also urged the government to bring forward its commitment to extending automatic enrolment by lowering the age threshold from 22 to 18, and reducing the £10,000 earnings threshold. The ABI said these need to be legislated for as a matter of urgency.

The report has received broad support from the UK pensions industry.

Gail Izat, workplace managing director at Standard Life, said: “The ABI’s call for the minimum contribution level to increase up to 12% over the next decade is sensible and, if combined with other measures such as the removal of the current lower earnings limit, will prevent future generations from sleepwalking into retirement, thinking that their savings will be sufficient. It is important for the decisions to be made in the very near future.”

Phil Brown, director of policy at B&CE, provider of The People’s Pension, said: “While a conversation about the minimum contribution rate is desperately needed, it should not just be between the pensions industry and government, we must find consensus among employers and trade unions too. The current cost of living crisis means that now is not the right time, but we need to consider the future of automatic enrolment once the economic situation improves.”

The report can be accessed online.