What is the Living Pension standard, and how could it boost your retirement pot?

A new pensions standard has been launched by the Living Wage Foundation to help low-paid workers build up their retirement savings. 

The Living Pension is a voluntary savings target for employers, after research from the Resolution Foundation found that four in five workers in defined contribution schemes weren’t saving enough to make ends meet in retirement. 

Here, Which? explains how the new Living Pension standard will work and gives advice on how much you’ll need for retirement, including how to boost your pot.

What is the Living Pension?

The Living Pension savings target is 12% of a worker’s salary, of which the employer would pay at least 7%.

It could also be a cash amount of £2,550 a year, based on 12% of a Real Living Wage worker’s salary. In this case, the employer would contribute at least £1,488. 

Under current automatic enrolment rules, those who qualify have a minimum of 8% of earnings paid into their workplace pension, with employers having to pay at least 3% of this, although many pay more voluntarily. The rest is made up of your own contributions and tax relief to make up the 8%. 

You'll qualify for automatic enrolment if you're over the age of 22 and below state pension age, earn more than £10,000 a year and work in the UK.

The programme is being run by the Living Wage Foundation – a campaigning organisation that aims to persuade employers to pay a living wage that's higher than the National Minimum Wage.

• Find out more: automatic enrolment explained

Why do we need a Living Pension standard?

The Living Wage Foundation said that low pension saving levels was a long-standing issue, and its research found workers were worrying about an uncertain future. 

Its survey, of 3,058 pension savers in the UK in February, found:  

• more than half said they feel like they will never be able to retire
• around two-thirds said they will feel the need to work for several years beyond retirement
• around four in 10 are not confident that they are saving enough to meet even basic needs in retirement 
• one in 10 have stopped or reduced pension contributions in the past six months, and 8% plan to cut contributions in the next six months. Of these, four in 10 blamed rising living costs.

Katherine Chapman, director of Living Wage Foundation, said: ‘The current cost-of-living crisis is exacerbating the problem. Struggling to make ends meet as living costs soar, many workers are unable to prioritise pension saving, which risks storing up a future crisis of millions unable to afford even the basics in retirement.’

• Find out more: should you stop your pension contributions?

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Which employers have signed up?

So far, six employers have signed up to the Living Pension, including Aviva, Citizens UK, Good Things Foundation, Herbert Smith Freehills, Phoenix Group and Wealthify. 

Any companies that sign up to the voluntary Living Pension standard can refer to themselves as 'accredited Living Pension employers'.

How to find out your employer’s pension contributions

If your employer has not signed up to the Living Pension, it doesn’t necessarily mean you won’t save enough for retirement.

Many employers pay more than the minimum 3%, and some may even match your own contributions if you decide to increase them.

To find out your employer's pension contributions, you should be able to see this on your annual pension statement if you were signed up for automatic enrolment.

Your statement will also inform you how much you currently have built up in your pension pot. 

If you don't know your pension provider, your company's HR department should be able to help.

It might also be that you’re enrolled into a different type of pension scheme, such as a defined benefit scheme, which includes final salary and career average schemes. These schemes pay a retirement income based on your salary and how long you’ve worked for your employer.

• Find out more: workplace pensions explained

How much do you need to retire?

To help figure out how much you need in retirement, we've spoken to thousands of retired Which? members to see where their money is being spent.

When we carried out research in 2022, we found that households with two people reportedly spent an average of just under £2,340 a month, or around £28,000 a year, for a 'comfortable' lifestyle. 

This covers all the essential expenses, which came to £19,000 per year on average, and some luxuries, such as European holidays, hobbies and eating out.

• Find out more: how much do I need to retire?

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4 ways to boost your pension pot

If your employer hasn’t signed up to the Living Wage, and won’t raise its minimum contribution, here are some other ways to boost your retirement savings:

1. Increase your contributions 

Check to see how much you're paying into your pension and increase contributions if you can afford it. 

For example, you could increase your percentage contribution if you've recently had a pay rise, or just pay in a lump sum whenever you can.

• Find out more: what is a personal pension?

2. Claim National Insurance credits

When you're not working, you'll stop paying National Insurance contributions (NICs), which count towards your state pension entitlement.

To get the full new state pension, you need at least 35 years of NICs. 

To avoid gaps in your contribution record, it's worth checking to see if you are able to claim National Insurance credits instead. You can receive them if you claim child benefit, receive a carer's allowance, are unemployed or have a qualifying illness or disability.

• Find out more: National Insurance credits explained

3. Search for lost pensions

You may have pension pots built up while working for past employers that you’ve forgotten about. 

Around 2.8m pensions are considered 'lost' – an increase of 75% over the past four years, according to the Pensions Policy Institute (PPI) and the Association of British Insurers (ABI). 

The average lost pot is worth £9,470, and finding one isn’t always straightforward. However, our recent news story on searching for lost pensions can help you track down your retirement savings.

4. Get free pensions advice 

If you need help and advice about your pension, you can get free, impartial guidance from the Money and Pensions Service.

Plus, if you're over 50, you can book a free guidance session with a specialist.

We also have a wealth of free Which? pensions advice – our guide on how to plan for retirement is a good place to start.