UK workers prepared to pay more into workplace pension

Workers in the UK have embraced auto enrolment and would be happy to pay more than double the current default rate of pension savings, according to a global study by pensions and investment firm Aegon.

Auto enrolment has been successful in ensuring millions of people are saving for their retirement, but there is some concern that increases in the minimum contribution rates will lead to people dropping out.

However, the new research suggests that people will accept the increases and continue to save.

On average, UK workers would support paying up to 7% of their annual salary into a pension every year — more than double the current default rate of 3% and above the level coming into force in 2019 (5%).

Younger workers would support an even higher contribution level, at 8%. And nearly one in six of those in their 20s would be willing to pay between 11% and 15% of their salary towards pension saving, Aegon found.

The study also shows that workers in the UK place a greater emphasis on workplace pensions in helping them to build their retirement income.

Worldwide, people expect workplace retirement plans to fund only 24% of their overall retirement income, while in the UK people expect more than a third (34%) of their retirement income to come from workplace pensions — second only to the Netherlands (37%).

“Saving in a pension through your employer has become a natural part of working life in the UK today, with people embracing saving in this way,” said Kate Smith, head of pensions at Aegon.

“There´s also a growing appreciation that the level of retirement income is dependent on the contributions individuals and their employer make throughout their career, leading to a desire to pay more,” she added.