Friends Life head of corporate benefits Martin Palmer says the 8 per cent minimum contribution under auto-enrolment should be increased to about 12 per cent.
From 2012, firms will be required to enrol workers into pensions, with employees contributing 4 per cent, employers 3 per cent and the state 1 per cent. Workers will be able to opt out.
Speaking at the Labour conference in Liverpool last week, Palmer (pictured) said when economic conditions make it feasible, contribution levels will need to be increased to about 12 per cent. He said: “Auto-enrolment is coming at a time when people are effectively suffering real salary reductions, so it will be difficult for many to pay pension contributions but 8 per cent is not enough for a really good pension.”
He said asking people to commit to adding 1 or 2 per cent of wage increases to their pension contributions is a good way to boost the amount people save.
Speaking to Money Marketing at the conference, Shadow pensions minister Rachel Reeves (pictured) said 8 per cent is a good start. She said: “When people see their pot start to build they will start taking an interest in the money, how it is working for them, what sort of income they want in retirement and whether 8 per cent is enough to achieve that.”
Hargreaves Lansdown head of pensions research Tom McPhail said: “Even 12 per cent is at the bottom of what is acceptable, ideally, you want contributions of around 14 or 15 per cent.”