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Ten-year anniversary of Auto-enrolment, 10 million auto-enrolled. Is this success?

20 September 2022

By Shelly Durrant

Next month marks the tenth anniversary of the government’s flagship auto-enrolment policy (AE). More than 10 million people have been auto enrolled into a workplace pension scheme since the programme began in October 2012. But how successful has it really been?

When the initiative launched, it got many people saving into a pension for the first time in their lives. When someone mentions the word pensions, most people switch off because for those in their 20’s and 30’s, retirement, frankly, is of little interest to them. Why on earth would they need to worry about it now? Of greater interest to them are shorter horizon issues such as paying off a student loan, getting onto the property ladder, purchasing a car or booking a holiday. So, for many, saving into a pension is not high on the list of things to spend money on and is something best left until your 40s. But by waiting until then, you lose virtually all of the wonderful benefits and compounded returns of long-term retirement saving.

In this sense, the workplace pension has been an unrivalled success in helping to bridge the gap and get people, that wouldn’t normally save into a pension, doing so.

A successful problem to have

Great success often brings its own challenges. For auto enrolment, one of the biggest hurdles has been around the contribution levels. Despite the minimum that can be paid into workplace pensions edging up over the years, it’s not enough to support people’s retirement lifestyles when the time comes. We read time and again, that as a nation we don’t save enough into our pensions and are going to find ourselves falling financially short in retirement.

The minimum contribution is 8% of qualifying earnings, with employers paying at least 3% and employees, who benefit from tax relief on payments, making up the remaining 5%. Unfortunately, people haven’t woken up to the fact that the amount saved via auto-enrolment alone, is not going to be enough to support their retirement needs.

The next step should be to raise the minimum contribution further to help build a decent retirement income. Some would argue that it needs to increase to 12%.

This will be no easy feat. No less with the cost-of-living challenges many are facing. It should be no surprise that we are seeing many workers reducing their contribution levels or putting a stop to them together currently.

Focus for the next 10 years needs to be about adequacy. People genuinely don’t understand what an adequate level of income in retirement is and how much they need to put by monthly to achieve it. The work of the workplace pension is only half done, there’s so much more that can be and needs to be done.

Don’t look at me for the answers though.

But a good place to start, is for employers, regulators, and providers to explicitly employ language that compels people to see later life as importantly as they do their ‘present’ life.

Currently, the majority do not.