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What's Next for Automatic Enrolment

The Pensions Regulator (TPR) has today announced that one million employers in the UK are now automatically enrolling their staff into a workplace pension.

The first three-year review into the effectiveness of automatic enrolment (AE) was published at the end of last year and it concludes that AE has been a success to date, with another nine million workers having workplace pensions since 2012, making a total number of over 16m at the end of 2016. The greatest increase in the number of savers comes from young people and women, with participation rates nearly doubling for 22-29 year olds and the proportion of female workers contributing now equalling men at 73%.

A government policy paper released last year shows the total amount saved in workplace pensions reached a ten-year high of £87.1bn in 2016, with auto-enrolment expected to have increased contributions by £20bn a year by 2019/20. The government’s ambition is to implement this change by the mid-2020s, along with scrapping the minimum qualified band earnings of £5,876, which could cost employers around £1.4bn a year.

However, the government said new research shows small and micro employers – which represent 98% of all UK businesses – are finding auto-enrolment “necessary, sensible and easier to implement than first expected”.

The review has identified 3 strategic issues that need further work:

  1. While more workers are saving under AE, current saving levels are too low. Starting people earlier and lowering the contribution threshold will make a difference but it will not be enough unless the minimum contribution rate eventually rises above 8%.

  2. Self-employed individuals are not automatically enrolled and savings rates are decreasing in this group.

  3. The new savers under AE are not actively engaged with their savings plan and may not be making the most if it.

“We are creating a nation of responsible employers who are reassuring their workforce that with their support, they will have a secure retirement,” minister for pensions and financial inclusion, Guy Opperman, said. “Our recently announced proposals will ensure even more people, including 18- to 21-year-olds, lower earners and multiple job holders, can benefit from a workplace pension in the future.”


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