-
90% of the UK population don’t know how auto-enrolment pension contributions will be invested
-
60% do not know what auto-enrolment is
-
27% do not know whether they will be auto-enrolled
-
42% of respondents are members of a company pension scheme
-
Just 6% of respondents knew they were definitely going to be auto-enrolled
With less than a month until auto-enrolment comes into play, new research from Friends Life, the Life Insurance & Pension provider, reveals that it is still a source of great confusion to the UK population.
An astonishing 60% of people admitted they don't know what auto-enrolment is, with a further 27% revealing they don't know whether or not they will be auto-enrolled by their employer, despite auto-enrolment being just one month away for employees of the very largest employers[i]. Staggeringly, just 6% of respondents suggested that they knew they were definitely going to be auto-enrolled. The lack of knowledge intensifies when it comes to understanding how auto-enrolment will work in practice with over 90% of respondents revealing that they don't know how the auto-enrolled money will be invested.
Currently, 42% of people are members of a company pensions scheme, highlighting that less than half of the population are taking advantage of workplace benefits, potentially limiting their future retirement income. Similarly over 80% said their job selection was not influenced by the pension on offer.
A gender divide is also evident within the research with two thirds of females (67%) compared with half of males (52%) not knowing what auto-enrolment is. Wales and Yorkshire & Humberside are the least educated about auto-enrolment with two thirds (64% in each region) not knowing about the new workplace pension plans. The North East are the most up-to-date with plans as 49% understand the initiative, though this still leaves the other half of the country in the dark.
Colin Williams, Managing Director of Corporate Benefits at Friends Life comments,
"Worryingly, our research results highlight a significant knowledge gap around auto-enrolment amongst the UK population.
"We need to ensure that all those affected by the plans have access to easy, understandable information. For auto-enrolment to be effective, employers and the government need to ensure a greater understanding of why the scheme is in place and how it will impact on the UK workforce's pension saving.
"Additionally the results reveal that a shocking number of people aren't taking advantage of their workplace pension entitlements. It is incumbent on all of us to ensure that people capitalise on all the opportunities open to them to ensure as happy and prosperous a retirement as possible."
Colin Williams' top tips for employees to keep ahead of auto-enrolment:
1. Where are you now?
The ins and outs of pension saving aren't always high on the agenda when you start a new job, so a good start is to find out what you've already got. Have you already joined a pension scheme? How much are you currently paying in? How much does your employer contribute?
If you're not currently saving anything towards retirement find out if your employer offers a scheme and whether you are eligible to join.
2. Check your eligibility
Under auto-enrolment your pension provision could change. Employers will have to automatically enrol all UK taxpayers, aged between 22 and the state pension age and earning over £8,105 into a pension scheme. Check if you are eligible. If you're not you may still be able to join the company scheme, and you may be entitled to an employer contribution.
What is paid in will depend on a number of factors, but it will make personal financial planning easier if you understand what you and your employer are likely to have to contribute. Remember that you may want to think about saving extra money on your own to ensure you have the income you want in retirement.
3. Where you and auto-enrolment begin
Different employers will begin auto-enrolment at different times. Legally obligations begin from October 2012, starting with large employers. Finding out from your employer when they are expecting to start automatically enrolling people will help you prepare, and you may even be able to start looking at ways to save in the meantime.
4. Work out where your money goes
Your contribution into a pension scheme, coupled with contributions from your employer and tax relief from the government really can make a big difference to your pension savings. The minimum amount enrolled employees are asked to contribute into a pension will start at 1% and increase to a minimum contribution of 2% of earnings from 2017.
5. Be positive
The timing of these changes may not seem ideal given the economic climate. But putting off saving today could leave you reliant on the state pension, which may not be enough to provide the lifestyle you want in retirement. Positive action, even if just small sacrifices here and there, really could make all the difference down the line. Auto-enrolment is a good starting point for saving and getting into the habit now will make a big difference later.
|
