Why you should become a Living Pension Employer

Let’s face it: as things stand, most working people in the UK aren’t having enough money put into their pension pot to be able to live with dignity and security when they retire. In 2022, the Resolution Foundation found that 4 in 5 workers in Great Britain weren’t having enough money put into their pot to have a decent standard of living after they stop working. As such, while the introduction of auto-enrolment pension contributions over a decade ago was a big step forward, it’s clear that they aren’t enough.

In addition to this, women, racialised folks, ethnic minorities, LGBTQIA+ folks, and people with chronic illnesses and/or disabilities are all more likely to be in pensioner poverty. All of these groups are more likely to be stuck in low paid and insecure work and/or to work part-time on a long-term basis. In these situations, their accumulated pension contributions will likely be worryingly inadequate to meet their basic living costs when they retire.

That’s why, a few years ago, the Living Wage Foundation set out to develop a robust standard for how much someone would need to have put into their pension pot each year to be able to live with dignity in retirement. Based on research by the Resolution Foundation, which used the same rigorous cost-of-living methodology we apply to calculate the real Living Wage, we agreed that a 12% total annual contribution would meet this criteria. We call this the Living Pension.

For someone on the current real Living Wage of £12.60, working full-time (37.5 hours a week), this works out to £2,950 per year. In comparison, the same person on statutory pension contribution levels would only have around £1,466 put into their pension pot each year. That’s about half as much.

So, now we know approximately how much people need to have put into their pension pot each year to be able to retire with dignity and security – how do we actually get to a point where everyone can achieve this?

We believe that part of the answer to this question is through employers voluntarily stepping up to provide all their workers with at least a Living Pension. By leading by example and publicising their approach to pensions, such employers raise the bar in their respective sectors and communities – and in doing so, make it more likely for other employers to adopt similar practices.

To encourage employers to take this step, we launched our Living Pension accreditation. It works like our Living Wage accreditation: employers who meet the requirements get access to our bright and recognisable Living Pension Employer mark, which they can display on their shopfronts, website, and company vehicles, among other places. Living Pension Employers are recognised on our website, can be celebrated on our social media channels, and can get opportunities to publicly speak at regional and national events as a ‘champion’ of the Living Pension, among other perks.

In the simplest terms, accredited Living Pension Employers ensure that all of their staff and regular contracted workers aged 18 and over can access a Living Pension. They have two options for implementing the Living Pension. Firstly, employers can meet the percentage savings target, where the employer needs to ensure that the default contribution level is at least 12% total, with no more than 5% coming from the employee. Alternatively, employers can meet the cash savings target, where they need to ensure that each worker enrolled in the employer pension scheme gets a minimum cash amount put into their pension pot each year. This amount is currently £2,950 for someone working 37.5 hours per week, with a minimum employer contribution of £1,720, and is pro-rated up or down for each employee based on their contractual working hours. The cash target is based on 12% of a full-time real Living Wage worker’s salary, so it changes as the real Living Wage changes.

Employers who meet the Living Pension accreditation requirements are likely to see several organisational benefits: early data and feedback that we’ve collected from Living Pension Employers indicate that they experience improved recruitment and retention, higher levels of pension enrolment and engagement, a better reputation, and improved relations with local communities and stakeholders.

Ultimately, the bottom line is that offering a Living Pension is the right thing to do – it’s good for people living and working in Brighton & Hove, and it’s good for the city and its surrounding areas. In 2023, the Sussex Community Foundation reported that Brighton & Hove had higher levels of pensioner poverty than the national average: by providing a Living Pension and supporting their workers to save enough for their retirement, local employers – both big and small – can play their part in tackling pensioner poverty in the Brighton area.

If you would like to learn more about our Living Pension accreditation or begin the application process, you can email me directly at [email protected] or submit a web inquiry here.