Increasing the minimum pensions contributions for AE could largely solve that problem. The Labour party supported the idea in opposition but appear to have cooled on the idea now in government.
AE lags behind
DWP minister Sir Stephen Timms speaks for many (including myself) when he said at an Institute for Public Policy Research and Centre for Social Justice (CSJ) event that he wants the government to set out a timetable for increasing the minimum AE pension contributions.
He said: “I am not the pensions minister and I realise we are living through a cost of living crisis, but as I said when I chaired the work and pensions committee, I think we have got to have a road map so people can see we are committed to doing this and when."
Tackling pensions adequacy could also boost the flow of institutional capital into the UK.
Employers know they are skimping on DC pensions; only a quarter of employers think their DC pension provision will leave workers with a comfortable retirement, according to recent WTW research.
Employees are also concerned. The WTW Global Benefits Attitudes Study found that a third (31 per cent) do not now think they will be able to retire before the age of 70, which is up from 16 per cent in 2019.
Indeed, WTW has previously called for employers to auto-enrol new employees at the highest matching contribution level in their scheme, as an effective way to significantly improve retirement savings.
However, in reality, the majority of employers (86 per cent) with matching contribution schemes auto-enrol employees at the minimum contribution level.
In its report "Adequacy of future retirement incomes", the Institute of Fiscal Studies has found that one in three people will fail to meet the minimum retirement living standard of £14,400 a year in retirement.
Worse still, generation rent would need broadly double the pot size of someone that owns their own home. An astronomical amount.
The sums simply do not add up for renting in retirement or, for that matter, for the government to pick up a gargantuan housing benefit bill for pensioners, who, just two decades ago, were, for the most part, owner occupiers.
Many pension systems, including the much-lauded Australian superannuation approach, struggle with how to extend coverage to self-employed individuals.
The gig economy is here to stay but the pension industry by and large has yet to really understand and create products from mortgages to pensions for portfolio careers, while too many employers do everything they can to duck paying AE contributions by classifying their workforce as independent contractors.
