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Majority of firms making ‘minimum possible’ auto-enrolment contributions

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13/02/2014
The majority of employers who have begun automatically enrolling their workers are paying in the minimum level of contributions legally allowed, pointing to potential future disappointment for savers.
Majority of firms making ‘minimum possible’ auto-enrolment contributions

According to the BBC, the country’s largest pension managers have reported the minimum possible level of contributions was being put in by between 66% and 90% of firms.

Auto-enrolment contributions will eventually reach a total of 8% of band earnings: made up of 4% from the employee, 3% from the employer and an additional 1% in tax relief from the government. This is due to happen for all employers by October 2018.

However, as the scheme gets off the ground contribution rates are being brought in at a low level and raised gradually.

At present employees contribute just 0.8% of salary with 0.2% in tax relief. Employers have to put in a contribution which matches 1% of the worker’s earnings, according to the BBC.

Contribution levels for auto-enrolment have long been a worry among pension industry commentators.

The Association of Consulting Actuaries said the total contribution rate should rise to 12% by 2020 to make a real difference. While the National Association of Pension Funds suggested 15% as the optimal level.

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