UK. Most auto-enrolment pension savers and employers are still anchored to the minimum rate
It’s nearly 10 years since automatic enrolment was launched amid great fanfare; TV adverts featuring famous bosses such as Baroness Brady and Theo Paphitis were part of a huge Government drive which has seen 10.6 million workers enrol in a workplace pension scheme, saving an additional £28.5bn towards their futures.
Despite this rip-roaring success, there remains the question of whether the average auto-enrolment member is saving enough for the retirement they want.
The Pension Commission, which paved the way for auto-enrolment, was clear in its 2005 review that at least 16 per cent of qualifying earnings – double the current minimum contribution -– would be required to provide an adequate retirement income, with half expected to come from a workplace pension and the other half from additional voluntary saving.
But new research shows this hasn’t happened.
Our report, Pension Adequacy: A Pension Saver’s Perspective, finds that most auto-enrolment pension savers and employers are anchored to the minimum rate, with most savers wrongly believing that they are on track for a “moderate” or “comfortable” standard of retirement living, based on the Pensions and Lifetime Savings Association (PLSA) Retirement Living Standards.
Worryingly, four in 10 people believe that because the contribution rates have been set by the Government they are saving enough.
However, if somebody earning £30,576 now, were to save a total of 8 per cent contributions through auto-enrolment from the age of 22 to the age of 68, they would still be nearly £5,000 short of the £20,800 year that the PLSA calculates is required for a moderate standard of retirement.
The research also shows that the idea of additional voluntary saving is far from reality; almost half (43 per cent) of all savers haven’t considered paying more into their pension, almost half (46 per cent) don’t know they’re allowed to pay in more than the minimum, and two-thirds (64 per cent) of people have less than £10,000 in additional savings.
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