Auto-enrolment delivering on its objective but…
17 October 2018
Aegon calculates that auto-enrolment is delivering on its objective but do the figures add up to a better future in retirement?
Six years on from the introduction of auto-enrolment, employees making the minimum contribution would have accumulated a pension worth over £3,000 according to research carried out by Aegon.
The pension specialist said an employee earning an average salary, who was auto-enrolled in October 2012 and contributed the minimum amount over the past six years, will have generated a pension pot of £3,353, including £1,099 of their own pension contributions.
Since the introduction of auto-enrolment, almost 10 million employees are saving into a workplace pension scheme. The minimum contribution, shared between the employee and employer has risen from 2% to 5% over the period. However, with minimum contribution levels set to rise to 8% in April 2019, the same pension fund will increase to £16,251 over the next six years to October 2024.
Kate Smith, head of pensions, Aegon, commented: “Auto-enrolment is delivering on its objective with more people saving into workplace pensions than ever. Pension saving is fast becoming the social norm and auto-enrolment has been the catalyst for many to start saving for their financial future.”
However, Smith warned that the nation should not be resting on its laurels, with the total amounts saved still relatively small.
“Although some employers are going the extra mile, far too many people and employers are simply paying the minimum pension contribution, and even when this increases to 8%, it’s not going to generate sufficient funds for most people to live on in later life.
“People are living longer, taking gaps in their working lives and social care costs are falling at the feet of more retirees.
“The harsh reality is that people need to save around 12 to 15% 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.”
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