Improving retirement outcomes and economic growth: The win-win of a better-saved nation
- Royal London urges policymakers to set out a plan to increase default pension contributions to more adequate levels
- Landmark report with Oxford Economics analyses the impact of higher pension contributions on both households and the economy
- The analysis shows that, by 2040, only 36% of households with DC pensions will meet target retirement incomes
- Modelling shows that an increased flow of savings into pension schemes would lead to GDP gains over the long term
Royal London and Oxford Economics have today launched a landmark report, 'Higher auto-enrolment contributions, pension adequacy and economic outcomes'.
Based on analysis assessing the impact of pension contribution reforms on the retirement prospects of households, Royal London is urging policymakers to set out a plan to increase default contributions to more adequate levels.
The analysis includes the improved outlook for people reaching retirement and also considers the short and long-term impact on the economy.
It models five reform scenarios, exploring a range of potential changes to auto-enrolment rules, including existing proposals to reduce the minimum age and remove the lower earnings limit, but also making headline increases in default saving rates. Each scenario is designed to reflect international evidence that gradual increases give employers and employees time to adjust, building towards higher contributions over time.
The analysis reveals that most households are currently falling short of both key adequacy benchmarks: the Retirement Living Standards (RLS) and Target Replacement Rate (TRR). By 2040, only 36% of households that have only Defined Contribution pensions are expected to meet the TRR threshold, and just 26% will likely achieve the moderate RLS benchmark. This highlights the need for long-term reform to ensure many more people can enjoy a comfortable retirement.
The modelling also shows that, by 2060, an increased flow of savings into pension schemes would boost UK investment from the pension sector, leading to GDP gains ranging from £0.7 billion to £6.2 billion, depending on the scenario, and illustrating how the benefits of these policies stretch beyond improving pension adequacy.
Jamie Jenkins, Director of Policy at Royal London, commented:
"The analysis makes clear that without higher default contributions, millions of people risk falling short of a decent income in retirement, and it sets out ways in which we might start to address this through increasing contributions over time.
"It also illustrates that, over time, there are benefits to the economy in helping drive growth, something which everyone can benefit from.
"This is clearly a very challenging period for both businesses and households alike, and now is not the right time to start this journey, but we should make a plan to increase pension saving when that time arrives, and hopefully head off the more significant challenges of having an increasingly large and under-saved population of people in retirement.
"We hope this analysis provides an important contribution to the work of the Pensions Commission, enriching the evidence base for its recommendations."
Alex Stewart, Associate Director of Economic Impact at Oxford Economics, commented:
"Despite the progress made through automatic enrolment, many households are expected to reach retirement without sufficient pension savings in place. Our research shows that reforms to minimum default contribution rates can materially improve pension adequacy.
"However, our research goes further providing a holistic assessment into how reform will impact the wider economy. We estimate that by 2060 the annual GDP gains from automatic enrolment reform could be as high as £6 billion."
For further information please contact:
Neil Cameron, PR Manager
- Email: neil.cameron@royallondon.com
- Mob: 07919 171969
About Royal London
Royal London is the largest mutual life, pensions and investment company in the UK, and in the top 30 mutuals globally*, with assets under management of £199bn, 8.5 million policies in force and over 5,000 employees. Figures quoted are as at 31 December 2025.
Royal London supports partnerships aligned to its values as a purpose-driven, modern mutual. This includes our work as the only Founding Partner of the first British & Irish Lions Women's Team, where we are investing in women's and girls' rugby across both grassroots and elite levels to support the development of the next generation of players and coaches.
Learn more at royallondon.com.
*Based on total 2022 premium income. ICMIF Global 500, 2024
About Oxford Economics
Oxford Economics is the world’s foremost independent economic advisory firm. Covering over 200 countries, over 150 industrial sectors and 8,000 cities and regions, we provide insights and solutions that enable clients to make intelligent and responsible strategic business decisions faster in an increasingly complex and uncertain world. For more information, visit https://www.oxfordeconomics.com/
