One in eight may abandon workplace pensions as contributions rise
However, the research – reported in The Daily Telegraph – also showed many are undecided, with 4% definitely opting out, half still planning to save, and the remainder yet to make up their minds.
Under auto-enrolment rules, contributions will rise to 5% (from 2%) next April, with a further rise of 8% planned for 2019. There remain concerns that many will choose to opt out when the new contribution limits are introduced, and the survey of 2,007 private sector workers showed one in eight people were contemplating leaving their scheme.
A number of groups, including Scottish Widows and Aviva, have called for higher auto-enrolment contributions to beat chronic underfunding of pensions. However, ministers have resisted any further extension in the rules, believing that it may lead to more people opting out and dent the good work achieved by auto-enrolment in encouraging pension savings. Since its introduction, more than 8.5 million employees have signed up for a workplace pension and savings rates have sky-rocketed.
There have been calls to extend auto-enrolment to under-served parts of the market, such as the self-employed. One in five adults in the UK still saves nothing into a pension, with the problem particularly acute among younger people.
Workplace pensions are often an effective way to save for retirement because employers are compelled to match your contribution. This means you are effectively getting 10% of your salary paid in, despite paying just 5%. The government also contributes through tax relief and pension savings can mount up quickly.
See YourMoney.com’s Five points you need to know about auto-enrolment.