Britons need to be saving a whopping six times more than the minimum levels introduced by the government, according to the UK’s largest general insurer.
Aviva said that the British public should be setting aside 12.5 per cent of their salary to save for old age. This compares with the current minimum requirement of two per cent under the government-mandated auto-enrolment initiative.
The calls for Briton's to ramp up savings and not rely on minimum levels via auto-enrolment have been championed by a number of experts including former pensions minister Steve Webb in recent months.
Read more: Final salary reliance falls as saving stalls
Meanwhile, Andy Briggs, Aviva’s UK and Ireland Life chief executive, said that the UK needs to “face the challenge of people not saving enough for their retirement” adding that “there is no time for complacency”.
Setting out the firm's 10 steps to saving success, Briggs highlighted the challenge of an aging population.
“The British monarchy began the tradition of sending telegrams to centenarians in 1917, when King George V sent 24 telegrams. This year, the Queen will send over 10,000,” he said.
Aviva's three rules of thumb
40 year rule: Aim to begin saving at least 40 years before your target retirement date
12.5 per cent rule: Aim to save at least 12.5 per cent of your monthly salary towards your retirement
10 times rule: Aim to have saved at least 10 times your annual salary by the time you reach retirement age
The aging population means that it is up to the public to set aside cash for later years rather than depend on the state pension or be able rely on a final salary scheme as generations before have funded retirement.
Although Aviva stressed the level of money workers should set aside, it was commercially sensitive to imposing such contributions on Britain’s businesses.
Notwithstanding the amount that should be set aside, it said that minimum levels under auto-enrolment should be more gently phased in. This would mean the 12.5 per cent requirement would not be introduced until 2028.
The insurance giant also proposed introducing a flat rate tax relief structure and encouraged the public to set a target of starting saving at least 40 years before they plan to retire.
Aviva's 10 steps
|1||Phase towards 12.5 per cent contributions by 2028|
|2||Adopt a flat rate of tax relief – save 2 get 1 free – and rename as a ‘savers’ bonus’|
|3||Bring multiple job-holders into scope by combining their salaries to take them over the qualifying earning threshold|
|4||Explore options to extend AE to the self-employed|
|5||Remove the upper enrolment ceiling of the state pension age to encourage a longer working life|
|6||Officially encourage consolidation of small pension pots of £10,000 or less|
|7||Permit “without consent” transfers of contract-based workplace pensions|
|8||Increase the eligibility threshold to £10,400 and lower the contribution threshold to £5,200|
|9||Adopt Aviva’s three rules of thumb|
|10||Encourage the digitisation of pensions through government policy and regulation and a minimum level of digital functionality|