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02 Oct 2017

Auto enrolment: a ´huge success story´ but more still needs to be done

Five years on from the launch of automatic enrolment in October 2012, more than 7.6 million people have been automatically enrolled into workplace pensions.

According to the Pensions and Lifetime Savings Association (PLSA), almost three-quarters (74%) of all employers support the policy of automatic enrolment, with the proportion rising to 92% amongst large employers.

More than triple the number of people in the private sector who earn between £10,000 and £20,000 are now saving into a pension compared to 2012, with the proportion rising from just 20% five years ago to 63% in 2016. There has also been a significant rise — from 37% to 71% — in the proportion of people earning between £20,000 and £30,000 saving into a pension.

As much as £405bn has been saved into workplace pensions since 2012, of which £119bn comes from employee contributions, £247bn is from employer contributions and £39.2bn is tax relief.

Graham Vidler, director of external affairs at the PLSA, described auto enrolment as “a huge success story” which is transforming people´s retirement aspirations.

“The successful introduction of automatic enrolment has taken a significant amount of hard work from all parties with Government working closely with industry,” Vidler said. “However, we cannot rest on our laurels and it is now time to consider how we can build on this legacy. From April 2018, we will see contribution rates increase to 5% of qualifying earnings and then in April 2019, rates will increase to 8%. Government and industry must work together to ensure people realise the value of their contributions and do not opt-out.”

Vidler went on to explain that minimum contributions are likely to need to increase further, to about 12%, during the course of the next decade in order to ensure an adequate retirement income.

“The decision on how and when to increase automatic enrolment contributions should be taken once the initial phase of increasing contributions to 8% has been completed,” he added. “This will allow Government to see what lessons, if any, can be learnt before raising them further.”

The Association of British Insurers (ABI) echoed the call for contributions to be increased after 2019 and also said it was important to include all areas of the workforce in auto enrolment, in particular part-time employees, people with multiple jobs and the self-employed.

Copyright © M2 Bespoke 2017

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