A new “living pension” is needed to help workers enjoy a decent standard of living in retirement, according to a think-tank.
It would help firms ensure that their staff are saving adequately for their later years, the Resolution Foundation said.
The Building A Living Pension report, supported by Aviva, said the living wage campaign has already been successful in encouraging firms to pay their staff wages that deliver adequate living standards.
But workers who only pay in the minimum amounts required under automatic enrolment into their workplace pensions may fall short of saving enough for a comfortable retirement.
The report said further action is needed to encourage greater saving.
It proposes that firms set new benchmarks for the amounts people should be putting into their pension pot, to help those on low to middle incomes build up adequate retirement savings.
Laura Gardiner, director of the Living Wage Foundation, said: “Despite the success of auto-enrolment in spurring a basic level of saving across the workforce, many lower income workers aren’t building up the pensions necessary to cover essential costs in retirement.
“Responsible employers have a role to play in addressing that challenge, and a new ‘living pension’ standard is a vital tool for supporting and encouraging them to do so.
“Such a standard will build on the success of the living wage campaign, which has accredited 7,000 UK businesses committed to supporting workers’ everyday needs.”
The research suggests that these minimum income standards in retirement range from a weekly income of £209 for a single home-owner, to £445 for a couple in private rented accommodation.
The Foundation said that achieving these retirement income levels would, on average, require a final pension pot of around £70,000.
David Finch, senior research fellow at the Resolution Foundation, said: “The real living wage campaign has persuaded thousands of employers of the need to pay a wage that supports decent living standards for their staff today.
“But there has been less discussion of the need for decent living standards in retirement. This is why a living pension is needed too.
“The rollout of auto-enrolment has got millions more workers saving into a pension, and our proposal would build on its success.
“By setting minimum contribution rates or cash targets, a living pension would mean that firms can offer their staff decent living standards when working today, and in retirement tomorrow.”
Lindsey Rix, chief executive, UK savings and retirement at Aviva, said: “We are delighted to support the report from the Resolution Foundation, which shows that creating a living pension benchmark is achievable.
“Aviva has been working with the Living Wage Foundation who will now use this report to develop and pilot a living pension accreditation standard that is equivalent to the highly successful living wage campaign.
“We believe this would help low to middle income employees focus on how they can reach a decent standard of living in retirement.”
Phil Brown, director of policy at the People’s Pension, said: “Setting out the minimum income needed for a decent retirement will simplify pensions for the masses.
“The challenge for the pensions industry is to ensure that people understand clearly how much they need to save to reach that minimum standard.”
A statement from the Department for Work and Pensions (DWP) said: “Automatic enrolment has seen over 10 million workers enrolled into a workplace pension to date, with an additional £22.7 billion per year being saved compared to 2012 among eligible employees.
“Our ambition remains to enable people to save more and to start saving earlier. This Government is taking clear steps – such as the ongoing development of pension dashboards – to achieve this.
“However, helping workers secure greater financial security in retirement must always be a collective effort – with individuals, employers, the pensions industry and Government each playing their part.”