Promised adjustments to pension law are missing a key element: increasing minimum contribution levels.

The first King’s Speech of the new parliament included a Pension Schemes Bill, largely dealing with administrative matters, such as automatic consolidation of pension pots.

What was glaringly absent was increasing the minimum level of automatic enrolment contributions, which would do more to improve retirement prospects than any of the Bill’s draft contents.

At present, for an eligible employee, the minimum contribution is set at 8% (3% employer minimum/balance paid by employee) of annual earnings between £6,240 and £50,270. There is
widespread agreement among pension experts that current contribution, levels are too low. The last government accepted this and introduced legislation giving it powers – so far unused – to reduce both the minimum age and lower level of qualifying earnings.

The Financial Times recently reported that a group of “eight financial services veterans” had sent a letter to Rachel Reeves recommending that the minimum percentage rate should increase by 1% a year until it reaches 15%.

The Chancellor, like her predecessor, is in a bind on contribution increases. Someone will have to pay, which means annoying employers and/or employees when the impact of recent high inflation is still being felt. Raising contributions also hits the Exchequer’s coffers because of tax relief given to contributors.

Just because the government chooses masterly inaction, you do not have to. If you want a comfortable retirement, talk to us now about how much more you could be putting in your pension.