The Living Pension is a voluntary savings target for employers, after research from the Resolution Foundation found that four in five workers in defined contribution schemes weren’t saving enough to make ends meet in retirement.
Here, Which? explains how the new Living Pension standard will work and gives advice on how much you’ll need for retirement, including how to boost your pot.
What is the Living Pension?
The Living Pension savings target is 12% of a worker’s salary, of which the employer would pay at least 7%.
It could also be a cash amount of £2,550 a year, based on 12% of a Real Living Wage worker’s salary. In this case, the employer would contribute at least £1,488.
Find out more:Why do we need a Living Pension standard?
The Living Wage Foundation said that low pension saving levels was a long-standing issue, and its research found workers were worrying about an uncertain future.
Its survey, of 3,058 pension savers in the UK in February, found:
Katherine Chapman, director of Living Wage Foundation, said: ‘The current cost-of-living crisis is exacerbating the problem. Struggling to make ends meet as living costs soar, many workers are unable to prioritise pension saving, which risks storing up a future crisis of millions unable to afford even the basics in retirement.’
Find out moreWhich employers have signed up?
So far, six employers have signed up to the Living Pension, including Aviva, Citizens UK, Good Things Foundation, Herbert Smith Freehills, Phoenix Group and Wealthify.
Any companies that sign up to the voluntary Living Pension standard can refer to themselves as 'accredited Living Pension employers'.
How to find out your employer’s pension contributions
If your employer has not signed up to the Living Pension, it doesn’t necessarily mean you won’t save enough for retirement.
Many employers pay more than the minimum 3%, and some may even match your own contributions if you decide to increase them.
Your statement will also inform you how much you currently have built up in your pension pot.
If you don't know your pension provider, your company's HR department should be able to help.
Find out more:How much do you need to retire?
To help figure out how much you need in retirement, we've spoken to thousands of retired Which? members to see where their money is being spent.
When we carried out research in 2022, we found that households with two people reportedly spent an average of just under £2,340 a month, or around £28,000 a year, for a 'comfortable' lifestyle.
This covers all the essential expenses, which came to £19,000 per year on average, and some luxuries, such as European holidays, hobbies and eating out.
Find out more:4 ways to boost your pension pot
If your employer hasn’t signed up to the Living Wage, and won’t raise its minimum contribution, here are some other ways to boost your retirement savings:
1. Increase your contributions
Check to see how much you're paying into your pension and increase contributions if you can afford it.
For example, you could increase your percentage contribution if you've recently had a pay rise, or just pay in a lump sum whenever you can.
Find out more:2. Claim National Insurance credits
To get the full new state pension, you need at least 35 years of NICs.
Find out more:3. Search for lost pensions
You may have pension pots built up while working for past employers that you’ve forgotten about.
Around 2.8m pensions are considered 'lost' – an increase of 75% over the past four years, according to the Pensions Policy Institute (PPI) and the Association of British Insurers (ABI).
4. Get free pensions advice
Plus, if you're over 50, you can book a free guidance session with a specialist.
source https://www.which.co.uk/news/article/what-is-the-living-pension-standard-and-how-could-it-boost-your-retirement-pot-aQt6P8Z5MZdt