Automatic enrolment to double private pension income by the time people now starting work reach their retirement
Automatic enrolment could almost double private pension income by the time people now starting work reach their retirement.
Automatic enrolment could almost double private pension income by the time people now starting work reach their retirement, new research reveals today.
DWP modelling shows that with automatic enrolment median private pension income could rise to between £153 and £195 a week by 2070. Without these reforms, median weekly private pension income would only reach between £86 and £106.
The research, “Workplace Pension Reforms: Baseline Evaluation Report”, describes the pensions landscape before automatic enrolment is introduced this year, and employers’ preparation for the reforms.
Key findings are:
- Nearly three quarters of large employers support automatic enrolment;
- Private sector pension participation has fallen from 7.9 million (55 per cent) in 2003 to 5.8 million (42 per cent) in 2011;
- Low earners, individuals working for small and micro employers and those aged 22 to 29 show steep declines in pension participation;
- Private sector workplace pension saving has fallen from £39.3 billion in 2007 to £35 billion in 2011.
Pensions Minister Steve Webb said:
This October we will introduce the most important changes in pensions for a century to help people save and avert a pensions crisis in the future.
We are living longer yet 11 million of us are not saving enough for retirement.
Automatic enrolment will reverse this trend as millions will have a workplace pension and could double their private pension income, on top of a reformed state pension.
The research will be updated every year to track the impact of automatic enrolment.
Notes to Editors
- “Workplace Pension Reforms: Baseline Evaluation Report”
- Chapter 6 examines the long-term impact of the reforms. Table 6.4 shows the relative importance of various factors such as fund growth on an individual’s median weekly private pension income in 2070.
- Other findings include: * Over 90 per cent of employers who make contributions of three per cent or more would not reduce contribution levels for existing members in response to an increase in contribution costs. * Around two thirds (65 per cent) of individuals are expected to remain saving in a workplace pension. Of those who said they were undecided or would probably r definitely opt out, only 9 per cent said they would definitely opt out. * Around a quarter (24 per cent) of private sector organisations offer some form of workplace provision. Only ten per cent provide an open scheme in which the employer makes a contribution.
- The report examines eight key questions: * Were the Workplace Pension Reforms delivered to the planned timescales; * Does NEST accept all employers who choose the scheme, while offering low costs to members and remaining financially viable; * Do employers know about, understand and comply with their employer duties; * To what extent do the Workplace Pension Reforms increase the number of individuals saving in workplace pensions; * To what extent do the Workplace Pension Reforms increase the amount being saved in workplace pensions; * To what extent is delivery of the Workplace Pension Reforms achieved with a minimal burden on employers; * How has the pensions industry reacted to the Workplace Pension Reforms; and * What are the wider economic impacts of the Workplace Pension Reforms.
- Automatic enrolment will require employers to automatically enrol eligible workers into a qualifying pension scheme and make a minimum contribution.
- The reforms will be introduced this year in stages up to February 2018, with the largest employers going first. Pension contributions will be phased in, rising to a minimum total contribution of eight per cent by October 2018; three per cent from the employer, four per cent from the worker, and an additional one per cent contribution from the Government in tax relief. The reforms included setting up a new workplace pension scheme, the National Employment Savings Trust (NEST).