Automatic enrolment could almost double private pension income by the time people now starting work reach their retirement, new research reveals today.
DWP modelling shows that with automatic enrolment median private pension income could rise to between £153 and £195 a week by 2070. Without these reforms, median weekly private pension income would only reach between £86 and £106.
The research, "Workplace Pension Reforms: Baseline Evaluation Report", describes the pensions landscape before automatic enrolment is introduced this year, and employers’ preparation for the reforms.
Key findings are:
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Nearly three quarters of large employers support automatic enrolment;
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Private sector pension participation has fallen from 7.9 million (55 per cent) in 2003 to 5.8 million (42 per cent) in 2011;
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Low earners, individuals working for small and micro employers and those aged 22 to 29 show steep declines in pension participation;
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Private sector workplace pension saving has fallen from £39.3 billion in 2007 to £35 billion in 2011.
Pensions Minister Steve Webb said:
“This October we will introduce the most important changes in pensions for a century to help people save and avert a pensions crisis in the future."
“We are living longer yet 11 million of us are not saving enough for retirement."
"Automatic enrolment will reverse this trend as millions will have a workplace pension and could double their private pension income, on top of a reformed state pension.”
Ros Altmann, Director-General of Saga commented:
"Auto-enrolment will no doubt go some way to help solve the pension crisis but we need to move away from just relying on pensions to encourage planning for retirement. By including ISAs as part of workplace saving and by making pension funds partially accessible we could help generate a more active savings culture that will better help people prepare for their retirement and later life care needs. In uncertain financial times it is not surprising that people are unhappy to put their money in a 'locked box'.
"We also need to move away from the traditional model of retirement where people work until age 60 or 65 and are at this point expected to have saved all they will need for retirement. Most people at 65 will still be active and healthy with many years ahead of them to enjoy. By working, either full or part time, during some of these bonus years people can continue to save for their later life needs while also adding their valuable skills to the workforce.'"
The report is available here
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