Saving 12% of salary towards a pension “would drain rainy days’ funds”.

People’s rainy-day savings could take a hit of 10 percent if they had to save more of their paychecks for a pension, new research shows.

A jump in minimum retirement savings under an automatic enrollment from 8 percent to 12 percent per salary from the end of each month could be almost as big of a hit from people’s excess income and net financial wealth, he noted.

A 12 percent retirement savings target – split between individual, employer and government contributions into pots – has widespread support among financial experts.

A top industry recently demanded to be this Phases between 2025 and 2032, with the employer contribution increasing to 6 percent – Although the government would not be due if he would consider the plan.

The Association of British Insurers also floated that people pay off 12 per cent or at least ‘opt out’ of 10 per cent.

Hargreaves Lansdown, who conducted the Impact study on people’s rainy-day pots with forecasting firm Oxford Economics, says the pension saving minimum should not be increased any further.

The financial services company suggests that its research would offset an increase in long-term financial resilience from higher retirement savings with a decrease in short-term savings.

It calls on the government instead to look at how to get people to voluntarily increase their contributions when they are able, including encouraging employers to match higher contributions when workers choose to to pay more.

Many employers already offer this as an incentive to recruit and retain staff, and Hargreaves points to previous analysis showing that six out of ten people could increase their pension contributions if such an arrangement were available.

This could be popular, as people would increase contributions only as they needed, and increases in employer payments into pots would be aimed at those who value them, according to Hargreaves.

“Increasing pension savings is extremely important, but it cannot be addressed in a vacuum,” said Helen Morrissey, the company’s senior pensions and retirement analyst.

“Unless changes are carefully coordinated, we risk making demands on people to save for tomorrow that risk undermining their financial position today.

“If people are struggling with their daily expenses, we risk further increases in pension savings, causing people to save less and even build up debt.”

However, Hargreaves supports government plans announced in 2017 to raise the minimum age for automatic coverage from 18 to 22 and to introduce a pension saving from the first pound of income if it waits until 2025 when current cost of living pressures raise the current cost of living tax and its aftermath probably gone.

The study found that these measures would increase people’s long-term financial resilience by the end of 2029.

However, they would reduce people’s rainy-day funds — three months’ worth of emergency savings salary — and their net financial assets by 3.3 percent, as well as their excess income at the end of each month by 3 percent.

Morrissey says: “The scenarios modeled by the Barometer show the impact of the shift to 12 per cent minimum contributions, which is much higher than the 2017 review reforms.

“They have the ability to really grow pensions, but also have an immediate impact by eroding excess daily income and the longer-term ability to build savings and other assets.

“People on lower incomes are particularly affected, as are younger people who may find they can build larger pensions but are struggling to get up the housing ladder – we believe a more nuanced approach needs to be taken.”

A government spokesman says: “We want to ensure that changes are affordable in some way and at a time, balancing the needs of savers, employers and taxpayers.

‘Automatic enrollment has succeeded in transforming pension savings and more than 10.6 million employees have so far been enrolled in a workplace pension, saving an additional £28 billion in 2020 compared to 2012.

“The government’s ambition for the future of auto-enrollment will allow people to save more and save sooner by removing the lower earnings limit on contributions and lowering the auto-enrollment age in mid-2020, giving younger people, low, benefits -Paid and part-time workers as they receive contributions from their employer on the first pound. ‘

What do you think of possible changes to pension savings rules?

This is Money Readers voted 82 percent in favor of the ABI proposal for workers to save 12 percent of their paychecks for a pension, with employers contributing half of that – see poll above, pending.

We now ask which readers from 18 to 22 raise the minimum age for automatic coverage and introduce pension saving from the first pound of income. Have your say downstairs.