“Auto Enrolment has been an undoubted success and the increase of those contributing to a workplace pensions scheme from 20% in 2012 to nearly 80% in 2020 is testament to that. This is an important step in encouraging people to save more for the long term and think about their financial wellbeing. The fact that this has levelled off isn’t a surprise but work needs to be done to increase participation further, especially in those ages that fall below the edibility criteria and for those, especially women, in part time jobs where participation levels are much lower.
“Despite the success, however, there is a danger that auto enrolment could be creating a false sense of security for people that they will have an adequate income in retirement, when the levels they are contributing may not be enough. Attention now needs to move from creating a savings environment to making this effective by ensuring that contribution levels will be sufficient. While it is still vital to encourage everyone to contribute at the current level of contribution at 8%, it could still be below the level required to achieve an adequate pension; our analysis shows that well over half are not saving adequately for retirement. We continue to call for this to be increased to 12%.
“Focus should be given to the suggested PLSA Retirement Living Standard levels that lay out the necessary contributions needed for a comfortable retirement and employees encouraged to assess the amount they add each month armed with this knowledge.
“We are also pleased to see the development of ‘sidecar’ savings vehicles alongside pensions by some providers and would be keen to see these incorporated into AE options. This ability to save through the workplace without locking into a retirement commitment is a further helpful step in encouraging a long term savings mindset for employees.”
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