Commenting on today’s ONS pension figures, Kate Smith, Head of Pensions at Aegon said: “The figures published today show that auto-enrolment is working, with not only workplace pension numbers increasing, but we’re also seeing the pension provision gap narrowing between the private and public sector. Those age 22 – 29 lead the way with the largest growth in pension membership, up to 73%. Despite pressures on their incomes, this age group are obviously valuing pension investment and recognising that if they pay a pension contribution they also get one from their employer - effectively a pay rise. Once the auto-enrolment minimum age reduces from 22 to 18 in the mid 2020s even more young people will get the automatic right to an employer contribution and will start saving. This can only be good for their future.
“However there is more work to do. While nearly half of all employees are contributing up to 2% of earnings, most likely a direct effect of auto-enrolment, in order to build up a sufficient income they need to do more than this. In a matter of days, from 6th April 2018, minimum employee contributions will increase to 3% (for those earning between £5,876 and £45,000, including tax relief), and then again to 5% in April 2019. People need to be encouraged to keep on saving and commit to doing so for the long term.”
David Bird, Head of Proposition Development, LifeSight, Willis Towers Watson comments on the ONS Annual Survey of Hours and Earnings Pensions Tables: “The continued increase in pension scheme memberships from last year comes as no surprise. This is mainly due to the success of auto enrolment as well as the continued enhancement of defined contribution schemes encouraging people to save.
An increase in scheme membership gives employers and schemes more opportunity to communicate effectively and maximise the benefits of membership. More personalised, easily accessible and jargon free pension scheme communications will improve member engagement and retirement outcomes.
Increasing member engagement is particularly important at this time, with the first of the two phase planned increase to contributions for auto-enrolment in April. Some employees - especially younger workers - may decide to opt-out of workplace schemes if they do not understand the benefits. This could be extremely detrimental to their long-term savings, especially in the face of an ageing workforce.
In order to offset this reaction - employers should ensure they have dynamic communications, that are easily accessible, to raise awareness of the changes that are expected, and offer proactive guidance to help their employees continue saving adequately for their retirement.”
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