The workplace pension scheme has encouraged millions more workers to contribute to a pension after years of decline in workplace pensions although critics have pointed out that low paid workers and the self employed are still not covered.
According to analysis by Sipp and platform provider AJ Bell using DWP figures opt out rates for auto-enrolment have so far been low although the number of compliance notices issued by the Pensions Regulator has almost doubled in two years and there have been a handful of recent prosecutions for workplace pension fraud.
Analysis of the data shows:
- Almost 10 million workers have been automatically enrolled into a pension scheme
- The most recent contribution increase did not cause a spike in opt-outs
- Opt-out rates among younger savers are low
- The number of compliance notices issued by The Pensions Regulator has almost doubled, from 34,000 in 2016/17 to 61,000 in 2017/18
Tom Selby, senior analyst at AJ Bell, said: “A combination of people embracing the importance of saving for retirement and the power of inertia means the early stages of automatic enrolment have been an enormous success.
“Early indications suggest the increase in minimum total contributions introduced in April this year has not caused savers to flee for the exit door. Rising average wages will have helped here, dampening the effect saving in a pension has on people’s take-home pay.
“The next big test of the reform programme comes in April next year when contributions will be hiked once again, from 5% of relevant earnings to 8%. The omens for the impact this will have on people’s saving behaviour look positive, although clearly any negative shocks to the economy could yet derail the progress made so far.”
Mr Selby said the government may now seize the initiative and use the planned Pensions Dashboards to improve engagement and ultimately contribution levels beyond 8%.
AJ Bell was established in 1995 and has assets under administration of £46 billion and 198,000 customers.
• The Department for Work and Pensions data is available here: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/764964/Automatic_Enrolment_Evaluation_Report_2018.pdf