Participation in workplace pensions increase by nearly 38 per cent since auto-enrolment was introduced 10 years ago but 46 per cent of UK consumers are still not confident that they’ll have enough for a comfortable retirement, according to new research.
According to research by Barnett Waddingham, this figure jumps to 51 per cent for women, 53 per cent for people aged 35 to 54, and 68 per cent for people who have no other pension than the state pension.
The study also found that one in five British people do not have any private or workplace pensions and will only receive a state pension. In comparison to 13 per cent of men, this climbs to 26 per cent of women.
The income structure of 13 per cent of working British people prevents them from being enrolled in auto-enrolment at all. Almost 20 per cent of individuals who are eligible to opt-in depending on age (22 to 65) aren’t contributing anything to their DC pension. Around 11 per cent of those who are eligible based on their salary have a DC pension but aren’t contributing to it. Nearly 70 per cent of those who may opt in claim to have done so, compared to 29 per cent who haven’t. That is roughly a third of the population who are not receiving employer contributions and tax breaks.
The research shows that 32 per cent of British adults have defined contribution (DC) pensions. This increases to 46 per cent of full-time employees and 37 per cent of those between the ages of 22 and 65 who are eligible for auto-enrolment. Nearly 70 per cent of people who have a DC pension are now contributing to their pension, compared to 28 per cent who are not and 2 per cent who are unsure.
The remaining 31 per cent of respondents have a defined benefit (DB) pension, 17 per cent have a private/SIPP pension, 8 per cent are unsure of their type of pension, and 11 per cent are unsure if they have a pension at all.
Barnett Waddingham partner & head of DC Mark Futcher says: “Auto-enrolment was designed to get more people saving for retirement. At the simplest level that has worked, but the policy has by no means been a roaring success. There are two core problems: not enough people saving, and people not saving enough.
“The auto-enrolment legislation excludes a huge number of low earners, including almost one in ten full-time workers. The Government has opted to keep the minimum earnings band at £10,000 a year, despite multiple calls to scrap it. The new Minister for Pensions must rethink this; if they don’t, it falls to employers to consider increasing remuneration to their staff to account for the lack of long-term savings.
“Separately, of the 20 million people saving into a workplace pension, the vast majority aren’t saving enough. Savings rates have plateaued at the minimum contribution level. The Government had a ripe opportunity to include a 1 per cent employee contribution hike every two or three years, which would have moved many people towards the recommended 12 per cent saving rate. Instead, they failed to capitalise on the success; as the cost-of-living crisis worsens, it’s arguable they’ve missed their chance.”
