Similar to the living wage, an hourly rate of pay calculated by the Living Wage Foundation, which takes the cost of living into account, the living pension is a voluntary savings target for employers, to ensure that workers’ pension pots will provide enough income to meet basic everyday needs in retirement.
It was first launched in March 2023, for employers offering defined contribution (DC) pension schemes – most employers. There are now more than 70 accredited living pension employers, including Hebridean Housing Partnership, which offers a defined benefit (DB) pension scheme and is the latest organisation to gain accreditation from the Living Wage Foundation.
Speaking to HR magazine, Dena Macleod, Hebridean Housing Partnership’s chief executive, said: “The accreditation demonstrates to staff and others that we are committed to being an excellent employer that thinks beyond an employee’s working life and makes provision for their retirement.”
Read more: How can HR help close the pension savings gap?
Though the government’s auto-enrolment scheme has boosted employee savings for retirement, research conducted by the Resolution Foundation thinktank suggests that the government’s minimum levels are not enough to meet basic everyday needs in retirement.
Under automatic enrolment, a living wage employee working 37.5 hours per week would be £1,483.60 a year short of what research shows that workers need to save, according to the Living Wage Foundation.
Shelley Morris, senior project manager at the Living Wage Foundation, told HR magazine: "Work should provide a decent standard of living for everyone, now and in the future.
"With the cost of living still rising and pensioner poverty on the increase, it’s more important than ever that employers take action to support the long-term financial security of their staff.”
The living pension is independently calculated by the Resolution Foundation thinktank, based on data relating to the cost of living. To become a living pension employer, organisations providing a DC pension scheme must make an employer contribution of at least 7%, or £1,720, towards the set living pension savings level. This amount must apply to all directly employed staff as well as third-party contracted staff within scope of the living wage. The new DB scheme follows the same principles.
Read more: How to motivate mid-life employees to save for retirement
For HR leaders wanting to follow living pension employers’ lead, Macleod advised: “The best thing is to get in touch with the team at the Living Wage Foundation; they will take you through all the steps. They were excellent to deal with and extremely helpful.”
Morris said: “Becoming a living pension employer is a practical way to tackle pension poverty and put your employees’ financial futures first.
"HR leaders can play a key role by reviewing their pension provision, engaging decision-makers, and exploring accreditation. We offer clear guidance and support throughout the process.
“Many employers find they’re already close to meeting the standard. It’s a meaningful step towards becoming a more responsible employer, and creating work that works for everyone."
