Stephen Bird, CEO of Scottish asset manager Abrdn has called for a doubling of minimum pension contributions from 8% of pay to 16%.

Mr Bird said millions of people were heading for an inadequate income in retirement because the present minimum 3% contribution from employers and 5% from employees is not enough.

“To have any chance of achieving decent retirement outcomes, the contribution rate needs to double — taking it closer to the levels seen in other developed economies, or indeed, the Abrdn employee scheme,” he said.

Minimum contribution rates were initially set at 1% for employers and 1% for employees in 2012 when the auto-enrolment pensions regime was first phased in, and were raised in both 2018 and 2019.

A sharp increase in contributions is likely to be resisted by employers, especially small businesses struggling with labour costs. It also could lead to more employees opting out of pension saving, as well as costing the government more in tax revenues forgone. 

Craig Beaumont, of the Federation of Small Businesses, said that a move to 16 per cent would be “extreme and unaffordable”. 

The Pensions and Lifetime Savings Association called for a gradual rise to 12% over ten years.