10m people now save into a workplace pension but ‘more needs to be done’
The latest figures from The Pensions Regulator, which oversees work-based pension schemes across the UK, show that more than 10 million people have been automatically enrolled into a workplace pension.
The development follows the staged introduction of automatic enrolment rules, known as auto-enrolment, since October 2012. Under these rules, employers must enrol staff onto a workplace pension scheme if they are at least 22 years old and under state pension age; earn more than £10,000 a year for the tax year 2018-19; and are not already in a suitable workplace pension scheme.
Amber Rudd, the work and pensions secretary, took to Twitter to describe the regulator’s figure as a “soaraway savings success”.
Minimum contributions to auto-enrolment pension schemes currently stand at 3% from the worker and 2% from the employer, but are due to rise from 5% from the worker and 3% from the employer from April of this year.
More to be done
Tom Selby, senior analyst at investment platform AJ Bell, noted that auto-enrolment has increased the volume of people saving towards retirement. However, he believes more needs to be done and describes Rudd’s comments as “worrying hubris at the very highest levels of government”.
“Most people are still not saving enough and there remains no concrete plan to raise contributions beyond 8%,” he said.
Selby added that the UK’s growing army of self-employed workers still remain outside of the scope of the rules, with the government only committing to using behavioural techniques to boost savings levels in this part of the labour market.
“It seems highly unlikely this gentle nudge will have anything like the same impact as the shove of auto-enrolment,” he added.
Tom McPhail, head of policy at investment platform Hargreaves Lansdown, described the figure as “an astonishing success”. Nevertheless, he agrees with Selby that challenges lie ahead.
“The most important issue is to build better member engagement with their retirement savings. This will help them work towards saving the right amount every month, to make the most of their investments and to make good choices around how and when to draw a retirement income,” he explained.
McPhail says that more needs to be done to auto-enrol self-employed workers, as well as those with multiple jobs. For example, where someone has two jobs which both pay £8,000 per year, which means they are technically earning enough to be auto-enrolled but falling short of the threshold with each of their employers.