Aviva has called for total auto-enrolment contributions to reach 12.5% by 2028.
The life company has published a ‘pre-review’ of auto-enrolment ahead of the government’s own review in 2017.
At the moment the level of auto-enrolment contributions between employees and employers is due to hit 8% in 2019.
However in its report on the market, Aviva said while 8% is a ‘positive step’ it is ‘clearly inadequate’.
Aviva proposed these contribution levels to be phased up after a four year freeze to allow the 8% level to settle and get people ready for further rises. Then between 2023 and 2028 the contribution levels would gradually move towards the 12.5% mark.
This would go alongside a reform of tax relief which would move to a flat rate of tax relief which would work on a save two get one free basis, meaning for every £2 saved the government would put in £1.
Aviva said it looked at solutions such as auto-escalation in dealing with inadequate contribution levels, however felt they were not right.
‘While we acknowledge the potential challenges of increasing contributions for business and employees, perhaps through restricted pay rises, we believe this is a challenge we have to face,’ the report said.
‘We explored whether compulsion or mandatory auto-escalation could help solve the adequacy problem but believe neither are appropriate.’
Andy Briggs (pictured), Aviva’s UK chief executive, said while auto-enrolment has so far been a success, much more is needed to be done.
‘We have not yet completed the roll-out for all small and medium businesses – but it has already proved hugely successful,’ he said.
‘But there is no time for complacency and we still face the challenge of people not saving enough for their retirement. So we need to build on the success we’ve had so far and work out exactly how we’re going to crack this pension savings challenge.’
Source: City Wire