Saving for later life isn’t something that comes naturally for many people. Let alone putting money aside to save in a pension.
However, a report released on 24th February by the Department for Work and Pensions (DWP) has revealed that 0.76% of savers opted out of their auto-enrolment work place pension, following the 8% contribution hike which took effect in April 2019.
The reduction in enrolment is a positive step, as in 2018, when the first increase in minimum contribution rates occurred, there was a drop out between people aged between 22-29 and 30-39. Seemingly, because there seemed to be no ‘later life’ planning for people in these age brackets, who would rather ‘live for the moment’.
More than 10 million people are now saving for later life in a work place ‘pension pot’ now as a result of this saving initiative. According to government figures, 18.7million employees are now enjoying the benefits of a work place pension.
Automatic enrolment in work place pensions, was rolled out in stages since 2012. Whilst the rollout was being completed the contributions given by both employee and employer have slowly started to increase.
Up until April 2018, the contribution rate stood at 2% from an employee and 1% from the employer. Between April 2018-19, this was raised to 3% from the employee and 2% from the employer. Now it currently stands at 5% and 3% respectively.
Although creating automatic work place pension enrolment, is having a positive impact. Experts have warned that the saving levels are still too low, in order for people to obtain a comfortable lifestyle when they do retire.
Figures put forward by the Association of Consulting Actuaries, call for total contributions of at least 11%, although a contribution closer to 15% would be more likely the figure required for a suitable amount of money to be amassed to give someone a comfortable retirement.
Therese Coffey, Secretary of State for Work and Pensions, said:
“Automatic enrolment has been an unparalleled success, transforming pension saving for millions of people.
“The saving habit is sticking too, as people recognise the importance of putting money away towards their retirement.
“I want people to save even more, if they can, to make sure the retirement they get is the retirement they want.”
