Mercer, a pensions consultancy, recommends that the UK increase the minimum contributions to pension schemes to address a significant retirement savings disparity

between men and women and to enhance investments in productive assets. On Wednesday, Mercer proposed that the current 8% minimum contribution rate under the "auto enrolment" scheme for defined contribution (DC) plans be gradually raised to 12%. This change could potentially generate an additional £10 billion ($13.21 billion) in annual contributions.

This adjustment aims to narrow the "gender savings gap," with women typically retiring with an average of £69,000 in pension savings compared to £205,000 for men. This gap often results from career breaks for childcare or part-time employment.

The push for higher contributions aligns with the new Labour government's agenda, which includes a comprehensive review of the pensions industry. The government seeks to enhance the value delivered to pensioners and increase capital available for investment in infrastructure and green technologies, thereby boosting economic growth.

Amidst a challenging economic climate marked by a cost of living crisis, proposals last year to raise the contribution rate to about 16% saw limited advancement. The UK relies significantly on private market investments to support its financial needs.

In a collaborative effort to boost investment in non-traditional assets, Mercer, along with major pension and insurance firms like Aviva, Legal & General, Aegon, and M&G, committed under the Mansion House Compact (MHC) to allocate 5% of their DC funds to unlisted companies by 2030, a substantial increase from the current 0.36% or £793 million.

Nicholas Lyons, chair of the Phoenix Group and a leading figure in the MHC, emphasized the urgency in addressing Britain’s pressing personal finance issues to improve pensions and investments. He acknowledged the challenges of investing in unlisted companies, a sector traditionally dominated by safer investments like government bonds. Lyons stressed the importance of developing expertise and patience in expanding these investment opportunities, reflecting during a Mercer event on the practical limits and potential of such initiatives.