Auto-enrolment is rolling out

October 1st, the day Auto-enrolment started, may just have signalled a revolution in how we save for  retirement. By 2017 every business will have to automatically contribute to and enrol all staff over the age of 22 who earn more than £8,105 into a workplace pension. When it’s fully up and running, it’s hoped that  six to nine million more people  will have a private pension.  At Age UK, we sincerely hope it will be the nudge some people need to start saving.

Just 2.9 million people paid into a workplace pension last year, an all- time low and a deeply disturbing trend when combined with rising life expectancy. Yet more people are living longer after retirement than ever before, many of them struggling on a basic state pension  of around  £107.

Auto-enrolment is an important first step in reform, helping people begin to build up a nest egg for later life . But in order to fully live up to its potential, the Government has to  go further and faster.

Age UK believes  if  auto-enrolment  is to appeal more widely, particularly to those on low incomes, the Government must deliver its commitment to a flat rate pension . This should alleviate the concerns of those who fear it will jeopardise any means tested benefits they receive and give them a better idea of how much money they should expect at retirement, encouraging them to save.

More also needs to be done to ensure the public get maximum value out of their pensions.  NEST, a critical part of the reforms, has been specifically designed for those on lower incomes – those most at risk of poverty. That’s why we want to see the current restrictions on NEST lifted, so more people can accumulate their pension savings in one place.

Auto-enrolment will increase the number of people with small pension pots, especially for those who move  job  frequently.   By 2050 there will be an estimated 4.7 million pension pots.  Multiple pensions are already proving an issue for some people whose savings are too modest to annuitise successfully.

Whilst we are pleased the Government is taking action, we fear their proposed approach of ‘pot follows member’ might mean consumers could lose  If Government is to press ahead with this option, it’s important that it puts in place minimum standards, so schemes keep charges low, improve  governance and increase transparency.

We believe that now is the time  to provide a solid basis for private saving, by pressing ahead with plans for a simpler, fairer state pension and ensuring the private pensions market works more effectively for people’s hard-earned savings.

Age UK is pressing for action on a number of money-related issues. Find out more about our work on money matters.

3 responses to “Auto-enrolment is rolling out

  1. What we have seen recently is that those in the public sector who thought that they had a good works pension were told by the government, work longer, pay more in and get less out under the heading of affordability and tax payers money so should they be trusted / believed here ?
    While it maybe a good idea for those young enough or on reasonably high wages is it really of any benefit to those on low wages or are too near to retirement ? The truth is that those who try to exist on a basic state pension will be in receipt of various benefits. A small pension may take them over the threshold but will they be any better off financially ? – probably not.
    So maybe best viewed as an extra tax rather than a preparation for a better retirement and, of course, the extra pension will have to be bought from Cameron’s much loved private sector financial sector. So definitely good news for them.

  2. I’ve been fortunate to have employment that allowed me to save reasonable amount into pensions. But I know there are those who did not/ cannot because of low income. In part this is the responsibility of employers to pay a living wage. However that then is likely to make those employers uncompetitive in this global village we find ourselves operating in. Social aspects cannot be seen in isolation of a given nation because no nation is capable of existing within an economic vacuum, not even the US, EU or the Asia Major countries, as current problems show us. Otherwise we just keep on borrowing (BTW if every developed nation is in the same boat – who is it that keeps loaning us money?) to provide these services that are ever more expensive. The “pie in the sky” solution is to make sure everywhere on the planet is financially viable making poverty obsolete!

  3. Just a quick note on the statement “By 2017 every business will have to automatically contribute to and enrol all staff over the age of 22 who earn more than £8,105 into a workplace pension”. This is not strictly true; some firms with 30 or less employees will have their staging date during 2017 depending on their PAYE reference number. In addition new firms set up from 2012 will have staging dates running from May 2017 up February 2018.

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