The UK Pensions Commission has been urged to recommend extending automatic enrolment reforms in its final report to address concerns over retirement adequacy.
The Commission’s interim report, Pensions 2050: evidence and future priorities, published in May, concluded that higher levels of private pension saving will be needed to ensure low and middle earners achieve an adequate retirement.
Its final report, due in early 2027, is expected to set out measures to improve retirement outcomes while ensuring the pensions system remains fair and sustainable across generations. The Commission is currently seeking views from the industry to inform its recommendations.
Automatic enrolment reform has emerged as the most widely supported proposal among industry respondents, with many calling for minimum pension contributions to increase from 8% to 12%.
The Association of British Insurers (ABI) has proposed a phased increase from 8% to 12% by the end of 2030, arguing that a gradual approach would give employers and savers time to adapt amid ongoing financial pressures.
The ABI said increasing minimum automatic enrolment contributions to 12% would boost pension pots by around 50%, with the greatest impact on employees earning more than £18,700.
It has proposed splitting the increase equally between employers and employees, with employer contributions rising by 3 percentage points and employee contributions by 1 percentage point.
The ABI has also called on the Commission to recommend removing the lower earnings limit (LEL), currently £6,240, so contributions are paid from the first pound earned, and increasing the upper earnings limit (UEL) from £50,270 to £65,700.
According to the ABI, removing the LEL could increase pension pots by an average of 18%, while raising the UEL would ensure higher earners contribute on a greater proportion of their salary.
The association also wants the age for automatic enrolment lowered from 22 to 16 and has urged the Commission to consider reforms to improve pension saving among the self-employed, including changes through the self-assessment system.
Yvonne Braun, director of long-term savings and health and protection policy at the ABI, said: “The question is no longer whether pension saving needs to increase, but how we get there. The destination is important, but so is the journey. Any increase in contributions must be gradual and predictable, ensuring it remains affordable for both employers and employees.”
NEST has also backed further automatic enrolment reforms in its submission to the Commission. It said bringing the self-employed into retirement saving should be a priority, with HMRC-based saving mechanisms and autosave offering potential solutions.
Like the ABI, NEST argued that any increase in contribution rates should be phased in gradually to reflect the financial pressures facing many households and to give employers and savers time to adjust.
Ian Cornelius, chief executive officer of NEST, said: “We support a phased programme of reform that brings more people into saving, recognising any changes must be designed with the realities facing lower earners, many of whom are balancing long-term saving with immediate financial pressures.
“Retirement security and financial resilience are two sides of the same coin. We look forward to working with the Commission, government and industry partners to develop practical solutions that help people build greater financial security both today and in retirement.”
Iain McLellan, director at Isio, also backed a gradual increase in contribution levels, while stressing that reforms should address persistent inequalities in pension outcomes and improve support at retirement.
He said guided decumulation pathways, appropriate defaults and collective approaches could help members manage investment, inflation and longevity risks while preserving the flexibility of pension freedoms.
“There are difficult trade-offs between higher contributions, longer working lives and greater state support. It is imperative that the Commission turns ambition into action through a realistic roadmap that is economically sustainable, behaviourally credible and capable of delivering better outcomes across society,” he continued.
Pensions UK has also urged the Commission to establish a national framework for measuring retirement adequacy based on a minimum income threshold and target replacement rates. It has also proposed creating an independent National Council for Retirement Adequacy to review the framework and the wider pensions system every five years.
The industry body said the council should be responsible for proposing the minimum income threshold, suggesting it should initially be set at 32% of median earnings.
Zoe Alexander, executive director of policy and advocacy at Pensions UK, said: “The pensions industry is focused on maximising the value of every pound invested by savers, employers and the government. But we cannot deliver retirement adequacy without system change to increase saving rates. Working together with government, we see huge potential to deliver the economic and social benefits that will come from supporting the next generation of retirees to achieve the living standards they expect.”
Parliament passed legislation in 2023 enabling automatic enrolment to be extended to younger workers and applied from the first pound earned. However, the Labour government has yet to set a timetable for implementation, instead asking the Pensions Commission to consider reforms “beyond the current Parliament”.
