A Living Pension – Valuing Older Workers

With many workers squeezed between high living costs and low wages, many are struggling to save for retirement and leaving them in risk of a low income for life.

By offering a Living Pension, which is an independently calculated savings target, based on the real cost of living, employers can cut this risk for their workers. The Living Pension provides a decent standard of living in retirement when combined with the full State Pension. It’s based on a yearly contribution of 12% of all earnings to an employee’s pension pot with no more than 5% coming from the employee.

Staff retention

The Living Wage Foundation’s latest research shows that a Living Pension can also improve workers’ confidence and optimism about their retirement, improve overall job satisfaction, and encourage people to stay longer in their current jobs.

The research is based on a poll of 2,000 UK workers paying into a Defined Contribution pension, including 500 workers paid below the Living Wage.

Read the full report

No retirement

A third (32%) of those surveyed expect to have to work beyond State Pension age. This includes 10% who don’t think they will ever be able to retire – rising to 15% for part-time workers and workers paid below the Living Wage.

Some workers are also less optimistic about their retirement income than others. For example, two-thirds (67%) of men expect to have an individual income of more than £20k per year in retirement, falling to half (49%) of women.

The good news is that the Living Pension standard can help. 11% of those surveyed who are saving below the standard think they’ll never be able to retire. This drops to 4% of Living Pension savers.

Few are saving enough

The bad news is that the majority of those surveyed aren’t saving enough to build up a Living Pension. 68% of those who shared key information about their workplace pension were saving below the standard.

Those who stand to gain the most from a Living Pension (who are disproportionately likely to be uncertain about their retirement income and dissatisfied with their current workplace pension) are also the least likely to have one. Women make up just 27% of Living Pension savers, and a disproportionate minority live alone (24%), rent their home (19%) or are disabled (11%).

Happier savers

The overwhelming majority of Living Pension savers are also full-time workers (94%) and paid at least the Living Wage (98%).

The Living Pension can boost job satisfaction and retention

85% of those we surveyed say it’s important that employers contribute enough to their workers’ pension pots to provide a decent living standard in retirement.

That’s reflected in the data we collected about satisfaction with workplace pensions: over half (55%) of those saving below the standard are satisfied with their current pension, however that rises to over three quarters (79%) of Living Pension savers.

Half (50%) of Living Pension savers also say their pension improves their overall job satisfaction, while a third (32%) plan to stay longer with their employer than they otherwise would to take advantage of their pension offer.

Greater worker contributions

Introducing a Living Pension could also improve employees’ wellbeing. Half of those saving below the standard (54%) say moving to a Living Pension would make them less anxious about retirement. Interestingly, 44% would increase their own contributions if their employer accredited, helping to grow their savings even more.

A Living Pension supports workers to live well throughout their lives. Overall, this means a Living Pension could help people stay in their jobs for longer, save more, and retire earlier. It could particularly help those who are least likely to be saving enough at the moment, including part-time workers, low-paid workers, and groups facing structural inequalities.

Picture: Worth the wait. How the Living Pension can support workers’ ambitions to be able to retire with a degree of security and help businesses retain staff and skills that are essential to their success.

www.livingwage.org.uk