"I know there will be challenges to increasing contributions, both for businesses and employees, but I believe the benefits would be significant."
Aviva believes the increase should be phased in so the new minimum rate of 12.5% is achieved by 2028.
Currently the minimum contribution rates for an AE pension are 1% of salary from the employer and 1% of salary from the employee (including tax relief). From April 2018 that will rise to 5% in total, with a minimum of 2% coming from the employer. Then from April 2019, this will rise to 8%, with a minimum of 3% coming from the employer.
However Aviva says there is general agreement that an 8% overall contribution level is not enough to provide most people with a good level of income in retirement.
After 8% contributions are reached in 2019, Aviva proposes a freeze of four years, until 2023.
Between 2023 and 2028 Aviva proposes employer and employee contributions could then increase gradually towards 5% each which should be complemented by a new system of tax relief - a ‘savers’ bonus’ of 2.5%.
Andy Briggs, Aviva UK and Ireland Life CEO, said: “By increasing the minimum auto-enrolment contributions, we can improve the retirement prospects of ordinary people. AE has already proved hugely successful, but there is no time for complacency as 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.
“I know there will be challenges to increasing contributions, both for businesses and employees, but I believe the benefits would be significant. Increasing minimum pension contributions and introducing a simpler and fairer tax system for pensions would be an effective way of giving more people the chance of a decent retirement.”
