Auto-enrolment particularly successful in nudging young and low-paid into retirement saving
However, average contributions have clustered around the auto-enrolment minimum, which rose from 2% of pensionable earnings to 5% in April 2018
You can view the statistics here.
Tom Selby, senior analyst at AJ Bell, comments:
“Automatic enrolment has been successful in tackling the chronic lack of undersaving in the UK by driving up participation rates in workplace pension schemes. However, it is a job half done – contributions now need to increase to a level which ensures everyone is encouraged to build up a decent retirement pot. More thinking also needs to be done on how to bring the growing army of self-employed workers into the retirement saving system.
“This is no easy task and policymakers must tread carefully to ensure savers who have been successfully cajoled into saving in a pension aren’t scared off by a huge rise in the amount they need to pay in. This risk is particularly acute at a time when wage growth remains relatively low.
“The Government has already committed to abolishing the earnings threshold by the ‘mid-2020s’, meaning every pound you earn will qualify for a matched employer contribution.
“This will help to narrow the retirement income gap but more bold thinking will be required to foster greater levels of saving and engagement, and build on the early success of auto-enrolment. This could include investigating ‘Save more tomorrow’ schemes that have been effective in the US and considering allowing savers greater choice over their retirement savings vehicle.”