Lee Hollingworth, Head of DC Consulting, Hymans Robertson, says: “It is great to see that auto enrolment has successfully encouraged more employers to help more people save for their retirement, but there is no time to relax and think that this is ‘job done’. In reality, with more employers providing AE pensions, many will be believing that their pension contributions will provide them with a comfortable income in retirement. Instead, they will be surprised to find, when they retire, that they simply haven’t saved enough. Now we must address the challenge of ensuring, and encouraging, people to increase their savings to meaningful levels that will provide them with adequate retirement incomes.
“Recent ONS figures showed that while the overall amount (aggregate wealth) being saved into DC pensions increased in 2014-16 compared to 2012-14, undoubtedly due to AE, the level of pension pot (median) held by each individual has decreased. Even with the increase in contributions levels to 5% in April, and a further increase to 8% in 2019, people will be massively under-saving. The reduction of the AE starting age to 18 and changing the entry threshold to base contributions from the very first pound, announced in the recent auto enrolment review, will help. These moves alone, however, will not achieve enough and other measures, such as pushing out the target retirement date to coincide with their State Pension Age and further increasing contributions to a total of 12%, will be needed to achieve an adequate income in retirement. At 12% we would begin to see a contribution that will have a meaningful impact for employees’ retirement savings. At that level we can see far greater certainty of them reaching a target income that they can live on in retirement.”
Kate Smith, head of pensions at Aegon comments: “This is a fantastic milestone for workplace pensions. One million employers helping more than 9 million employees save for retirement is a huge achievement in less than 6 years. It will be interesting to see how things develop when contributions are increased this April and then again in April 2019, when the total rate jumps up to 8%.
“But we mustn’t forget the 5 million self-employed individuals representing 15% of the UK’s workforce that are waiting for the solution to their own retirement saving needs.
“Following the Government’s recent review of auto-enrolment, it promised to look at how to kick-start the self-employed into pension saving.
“Extending auto-enrolment to the self-employed will be a hard nut to crack. The self-employed, are an incredibly diverse group, but a solution must be found to stop this growing group missing out and the pension gap between them and employees widening. Government needs to grasp the nettle and address this growing savings gap before it’s too late.”
Steve Webb, Director of Policy at Royal London said: ‘This is a huge milestone and everyone involved in making automatic enrolment work deserves huge credit. Getting more than nine million workers started on the journey of pension saving is a crucial first step, and a pause for celebration is in order. But now the real work starts. The step up in contributions in April 2018 and April 2019 has to be handled well and we urgently need a plan to get people beyond the 8% minimum contribution planned under existing legislation. Getting so many people started with pensions is a tremendous achievement, but they risk being disappointed with the outcome if we do not get those savings levels up to more realistic levels as quickly as possible’.
Government announce 1 millionth employer enrols staff into workplace pension
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