The study will consider the impact of AE since launch, the current position and the future of the retirement savings programme as employers and employees approach the first increase in minimum contribution levels. Aviva offers workplace pensions to firms of all sizes, from large corporates to micro-businesses and continues to be actively involved in the AE market as hundreds of thousands of smaller companies begin to approach their staging dates.
The Pre-Review will include a series of events with policy and industry experts, policymakers, employers, and advisers. It will also build on consumer research and analysis Aviva has been carrying out since 2013 in the Working Lives Report.
The Aviva study will cover a range of topics, including:
• Whether AE should be expanded to cover new groups of people (including the self-employed)
• Given the crucial role of employers; what their experiences are and what would help them next
• Whether total minimum contributions should be increased beyond 8% and how the industry can engage consumers and employers to contribute more than the minimum
Andy Curran, Managing Director, Corporate and Business Solutions at Aviva, said “Most people would agree that auto-enrolment has been a great success in getting more people to start saving for their retirement, and our own research shows that around two thirds of employers and employees agree with AE. But we can’t be complacent if we are going to succeed in getting people to save smarter for their retirement. We have to recognise that the amount people are saving is still very low and engagement with pension saving is non-existent for some.
“There is a real risk that auto-enrolment has made some people believe the job is done when it comes to preparing for retirement, but in reality it is just the start. By carrying out this in-depth Pre-Review I hope we can take lessons from the story so far to make the future of retirement saving in this country a real success.”
The story so far
It was announced earlier this year that six million people have now been auto-enrolled into a workplace pension1 and the number of private sector employees paying into a defined contribution pension has now more than doubled since 2012.
But a rise in the number of people saving does not appear to have led to greater engagement, as an increasing proportion of savers are still unclear on what their savings are invested in:
The current picture
Auto-enrolment is currently in the SME (Small and Medium-sized Enterprise) phase with 1.4m companies still due to stage between now and 2018. Large companies that staged earlier are now starting re-enrolment while reviewing their workplace pension schemes to ensure they are delivering what was envisaged.
Businesses of different sizes have faced different challenges when implementing their workplace pension schemes. Aviva’s research has found that two thirds (64%) of large companies found AE to be straightforward with that figure falling to a quarter (24%) of small companies2.
The future of auto-enrolment
But there are still big changes on the way as employers and employees face automatic increases in their contributions, rising to 3% for employers and 5% for employees (including 1% tax relief) by 2019. With affordability to save continuing to be cited as the number one reason not to contribute to a pension, these increases will be a critical time for the future of AE.
“The figures speak for themselves,” said Andy Curran from Aviva. “The number of people saving has increased considerably, which is clearly positive, but many of these people don’t know where their money is invested and don’t ever review their pension. Our study will look at the issues around engagement and what can be done to boost it in the future.
“We will also look at the challenge for employers, especially SMEs who have also had to cope with a rise in the minimum wage, the introduction of the ‘living wage’ and ongoing economic and political uncertainty in the build up to the EU referendum.
“The last three and half years of auto-enrolment have been hugely positive in boosting retirement saving but they are just the start of the journey. If people want to genuinely thrive, not just survive, in retirement, then there is much more work to be done. I hope our study will help us to build on that work, provide plenty of food for thought for the Government ahead of their own review in 2017 and help create a brighter future for pension savers.”
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