On the go: A Cornish housing association is piloting a ‘living pension’ scheme for its employees, building on research that suggests some savers’ pension contributions will need to rise to more than double their current rate.
Coastline Housing, which owns and manages 5,000 homes in Cornwall, is one of six employers that will test a new benchmark rate enabling members to afford an “acceptable” standard of living in retirement.
The pilot was initiated by the Living Wage Foundation, which published a report in July showing the extent to which some members fall short of the minimum contribution rate required to secure a comfortable standard of living after work.
The LWF is evaluating two potential benchmarks for a ‘living pension’, the first of which is a “whole career benchmark” that would capture those who have been paying into a pension for their whole career and would need their contributions, including those of their employer, to sit at 11.2 per cent of their wage in total in order to have a living pension — an increase of 3.2 per cent above the auto-enrolment minimum.
The other prospective model is an “all age” benchmark, which would require savers and employers contributing 16.1 per cent based on the average rate that would apply if all workers started saving from their current age — just more than double the auto-enrolment minimum.
The report highlighted that more than four-fifths of those not in a defined benefit scheme did not meet any of the living pension benchmarks in 2020, and revealed a stark divide in savings rates between the richest and poorest earners, with some 16mn workers not saving enough to meet the cost of living beyond their working lives.
To counter this, the ‘living pension’ benchmark, which is being trialled by the six employers, aims to establish a rate of pension savings needed, composed of workers’, employers’ and government contributions, to secure a “decent standard of living”.
Hannah Tripp, head of people and culture at Coastline Housing, said: “We are already a Living Wage Foundation employer, ensuring every colleague receives at least the minimum salary required to live on. Joining this Living Pensions pilot will help us in our aim to be the best employer in the South West by offering a fair and equitable total reward package.
“Internal research highlighted how recent recruits and younger colleagues were benefiting less well from our previous matched contribution pension scheme. By being part of this pilot scheme we have already started engaging with a wider variety of colleagues in planning for a future that meets their needs.”
Paul Moffatt, director at Isio and a member of the Living Pension steering group, who is working with Coastline to implement the trial, added: “Everyone needs to be confident that what they earn during their working life will also help provide for them later on. The Living Pension aims to be straightforward and provide greater transparency to help people prepare for the future.
“Isio has been working alongside the Living Wage Foundation on developing the benchmark and are delighted to be supporting Coastline in its ambition to provide an acceptable retirement income. The association has repeatedly demonstrated a strong commitment to its employees and the implementation of a new flexible and inclusive benefit offering in line with the Living Pension principles will greatly benefit the team and Coastline’s wider community.”
