The Pension and Lifetime Savings Association has urged the Government to steadily increase contributions over the next decade from 8pc to 12pc, with employers putting in 6pc by the early 2030s.
This could result in additional pension contributions of £10bn a year invested in the UK economy, according to Standard Life’s calculations.
However, the Treasury will need to weigh up the benefits against the increased costs to businesses and workers.
About 71pc of rises in superannuation guarantee are paid for by employees out of lower wages, according to research published in 2020 by academics at the Australian National University.
Slow wage growth could hit both income tax and corporation tax receipts. If pension contributions rose to 10pc, 12pc or 14pc – with workers and employers sharing the cost – then government revenue could fall by £500m to £2.9bn per year between 2025 and 2040, according to research by Oxford Economics.
In the short term, GDP could drop as lower wages led to reduced household spending.
However, the economic advisory firm found that GDP would rise in the long term by up to £2.6bn per year as a result of the growth in pension assets and the increased investment in the UK. The “magnitude” of the fiscal cost would also reduce over time.
Tom McPhail, of consultancy The Lang Cat, said there was a “strong likelihood” that the Government would commit within the next five years to boosting employer contributions.
“There’s a strong consensus across the pension industry,” he said. “We’ve already seen cuts to the winter fuel allowance, and we’re looking at increases to the state pension age. The Government wants to plug the gap with private savings.”
Labour has come under fire for its decision to axe winter fuel payments for 10 million pensions. It will now only provide the allowance for those claiming means-tested benefits.
The controversial move has fuelled speculation that Rachel Reeves could close a multi-billion-pound hole in the public finances by raiding pensioners’ wealth.
Mr Ambery said that improved returns and higher pension contributions could result in “less dependency on the state pension”, potentially opening the door to means testing.
Economists have warned the state pension is unsustainable in its current form, which cost taxpayers £124bn in 2023-24, according to Office for Budget Responsibility estimates. This is forecast to rise by an extra £34bn in 2028-29 because of the triple lock, a government pledge that sees the state pension increase each year by the highest of inflation, wage growth or 2.5pc.