The government has been urged to create a national framework for measuring retirement adequacy, built around a minimum income threshold and target replacement rates.
Trade body Pensions UK said the government must define what a decent retirement income looks like – and then reform the system to help people achieve it.
Its proposals come as the government-backed Pensions Commission considers potentially major reforms for the sector.
In its response to a consultation following the Commission’s interim report, Pensions UK - which calls itself the 'voice of the pensions industry' - said it agreed with the panel’s assertion that “longer retirements, slower growth, and falling home ownership demanded a renewed national settlement on pensions,” with higher contributions needed urgently to improve retirement outcomes.
It said an independent National Council for Retirement Adequacy should be established to review the adequacy threshold and wider system every five years.
It also said a clear goal for the level of the State Pension should be set while a ‘Living Standards Safeguard’ should be introduced to maintain it once it has been reached.
Pensions UK called for automatic enrolment minimum contributions to be increased gradually to 12% by 2035.
It also wants reforms to be phased in carefully to recognise cost pressures on employers and savers while improving long-term retirement outcomes.
Finally, it said HMRC should consider how the tax system could be used to encourage retirement saving for the self-employed, alongside trials of digital tools and platforms.
Zoe Alexander, executive director of policy and advocacy at Pensions UK, said: “Reform of the automatic enrolment system is now urgent. Around 18% of the working population are not currently on track to reach even the Minimum standard of living in retirement, while many more will fall short of a Moderate or Comfortable retirement."
She said contribution rates should rise gradually to 12% by 2035 while other system reforms should be advised on by a National Council for Retirement Adequacy, taking into account broader economic circumstances including cost of living pressures.
She said the pensions industry is focused on maximising the value of every pound invested by savers, employers and the Government. “But we cannot deliver retirement adequacy without system change to increase saving rates. Working together with Government, we see huge potential to deliver the economic and social benefits that will come from supporting the next generation of retirees to achieve the living standards they expect.”