Industry body TISA has called for minimum auto-enrolment contributions to rise to 12% — an implicit acknowledgement that today’s pension saving levels fall short for most households. But for those already retired, the gap is already there. Here’s what the research shows and what options exist for people whose pension pot doesn’t stretch as far as they’d like.
The Investment and Savings Alliance (TISA) has submitted a recommendation to the Pensions Commission calling for minimum auto-enrolment pension contributions to be raised to 12% of whole salary, phased in over six years. The proposal is grounded in research suggesting that, for a median-earning household, contributions at this level — combined with the full new state pension — are what is needed to achieve a “moderate” retirement income as defined by the Pensions and Lifetime Savings Association’s retirement living standards.
TISA’s submission also calls for an auto-enrolment-style default framework to be extended to the self-employed, who are currently outside the statutory auto-enrolment system entirely, and for better support for low earners and people with multiple jobs who fall through gaps in the current rules.
Importantly, this is a proposal to a commission, not a legislative change. Today’s minimum auto-enrolment contribution rates — currently 8% of qualifying earnings in total — remain unchanged. Any move to 12% would require primary legislation and, under the proposed timetable, would be phased in over a number of years.
The significance of TISA’s proposal lies not in the policy change it is calling for, but in what it reveals about the adequacy of pension saving under the rates that have applied throughout most people’s working lives. Auto-enrolment was introduced in 2012. The minimum contribution rate was 2% of qualifying earnings in its early years and only reached 8% in 2019. Many older workers spent the majority of their careers in occupational schemes with varying levels of employer contribution, or outside workplace pensions entirely.
The admission embedded in TISA’s proposal — that 8% is insufficient for a moderate retirement at median earnings, and that 12% of the full salary (not just qualifying earnings) is what the maths requires — applies with even greater force to generations who saved at lower rates for longer.
“For people approaching or already in retirement, any future increase in contribution rates cannot help. The gap, where it exists, is already built in.”
Many people entering retirement in their 60s today accumulated their pensions through a combination of defined benefit schemes (which may have closed or been reduced over time), defined contribution pots built up at lower contribution rates, and a state pension whose amount depends on their National Insurance record.
For a meaningful proportion of this generation, the result is a pension income that covers essentials but leaves limited room for irregular expenses — home maintenance, care needs, supporting adult children, or simply maintaining the lifestyle they had during working years. This is not a failure of planning in any simple sense; it reflects the contribution rates and pension structures that were available to them at the time.
For homeowners, the family home is often their largest single asset. In many cases it has grown significantly in value since purchase — not through active financial planning but simply through decades of house price inflation. That equity is real wealth, but it is illiquid: it cannot pay a gas bill or a care fee while the homeowner remains in the property.
Equity release products — lifetime mortgages and home reversion plans — are one way some retirees choose to access some of that wealth without selling their home. The amount available depends on the property’s value and the homeowner’s age; the money can be taken as a lump sum, in drawdown, or as regular income.
Equity release is not the right choice for everyone. It affects the value of the estate passed on to beneficiaries, and the total cost depends on interest rates and how long the plan runs. But for homeowners whose pension income falls short of what they need, it is a concrete option worth understanding as part of a broader picture — one that, for the generation TISA’s research describes, exists precisely because the pension system did not accumulate enough over their working years.
Wondering if your retirement income covers what you need? Try our free equity release calculator to see what your home could add.
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