This figures, calculated by Aegon, assume that the employee and employer have made just minimum contributions over this full six-year period.
Aegon says this is a “small but important” start to their retirement planning. The figures show that if they stay enrolled for the next six years they should have a fund of £16,251.
The insurer points out that this is a gain of almost £10,000, as personal contributions over this period would be just £6,395.
During the past six years the total minimum contribution, shared between the employee and the employer, has risen from 2 per cent to 5 per cent. This will increase again to 8 per cent in April 2019.
October 2012 marked the start of the government’s flagship auto-enrolment policy, designed to reverse the decline in pension saving. According to government figures over 10m employees have been enrolled into a workplace pension scheme since the start of AE.
Employers were staged into auto-enrolment over almost 5 years, so only the UK’s largest employers will have schemes running for the full six years.
Aegon’s head of pensions Kate Smith says: “Six years on, auto-enrolment is delivering on its objective, with more people saving into a workplace pensions than ever.
“Auto-enrolment has been the catalyst for many to start saving for their financial future. Our figures show that for those saving since the outset, around two thirds of the value of the pension comes from employer contributions, tax relief or investment growth — highlighting the value of the scheme over simply putting more in cash savings.”
She says while participation levels remain encouraging, the industry needs to work with employers, and individuals, to increase contribution levels beyond the statutory minimum.
“Even when this increases to 8 per cent, it’s not going to generate sufficient funds for most people to live on in later life. The harsh reality is that people need to save around 12 to 15 per cent of their earnings over their working like to cover all eventualities.
“If people, and their employers, choose to increase their contributions by even a small percentage each month, the long term investment returns will prove extremely beneficial.”
