City law firm pushes staff to save more in pensions due to 'silent retirement crisis'
One of the City's largest employers is pushing its staff to save more into their pensions amid concerns they will not be able to fund their retirement.
Law firm Herbert Smith Freehills has increased its pension contributions from 8pc to 12pc in a bid to ensure workers save enough to meet basic everyday needs once they leave work.
It means lawyers and business support staff will have to contribute 5pc of their salary to their pension, up from 3pc. The firm is also lifting its employer contribution from 5pc to 7pc.
All new workers are automatically enrolled into the new pension scheme, while existing employees will be encouraged to opt in.
However, employees are allowed to voluntarily increase or reduce contributions as their individual priorities and commitments change over time, the firm said.
Last year, Herbert Smith Freehills handed on average £1.16m of profits to each equity partner. Meanwhile, newly qualified solicitors in London are paid a base salary of £120,000.
The pensions change meant Herbert Smith Freehills became the first law firm to become an accredited ‘Living Pension’ employer, awarded by the Living Wage Foundation.
The standard is appointed to employers which meet voluntary savings targets, independently calculated using a basket of household goods and services, as well as the UK’s Minimum Income Standard.
Other organisations signing up to the initiative include insurers Phoenix Group and Aviva, charity Good Things Foundation, investment company Wealthify and campaign group Citizens UK.
“Being a responsible employer is about more than ensuring staff are looked after whilst they work for you; it is about recognising that providing employees with stability and security in retirement is just as important,” said Alison Brown, executive partner at Herbert Smith Freehills.
It follows warnings from Blackrock boss Larry Fink that the world is sleep walking into a “silent” retirement crisis as people live longer.
The chief executive stressed last week that ageing populations and lower birth rates will make affording retirement more challenging.
Retired people will be forced to spend more on healthcare and housing as shrinking tax bases make generous state pensions less affordable, he warned in his annual letter to investors.
Last month, the Institute for Fiscal Studies found that fewer than one-in-a-hundred private sector employees are actively boosting their pension contributions when they receive a 10pc pay rise.