Auto-enrolment: what will the next 10 years look like?
21st June 2022 13:19
by Rebecca O'Connor from interactive investor
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The Association of British insurers calls for a widening of the auto-enrolment net.
In a report published today: “Automatic enrolment: What will the next decade bring?”, marking the 10-year anniversary of the introduction of auto-enrolment in the UK, the Association of British Insurers (ABI) calls for:
- - a gradual increase from 8% to 12% for minimum contributions
- - the introduction of ‘opt down’ to 10% and ‘opt up’ to 12% options, to account for people experiencing cost of living difficulties
- - for the reduction in the minimum age from 22 to 18 to be brought in by the government “as a matter of urgency”
- - reduction in the earnings threshold so that contributions are made from the first £ earned (currently there is a trigger of £10,000 earnings for auto-enrolment)
Becky O’Connor, Head of Pensions and Savings, interactive investor, says: “Being automatically enrolled into a pension is unequivocally a good thing, even if sometimes it might feel as though you’d be better off having the money now.
“The brilliant thing about auto-enrolment is people don’t even have to think about it – there is a safety net of retirement savings for the majority of working people. Whereas before auto-enrolment, whether you got a decent workplace pension or not was far more random and depended on who you worked for, as well as whether you were encouraged to actively sign up for the pension yourself.
“While there are many positives to the new regime, it was never a ‘one and done’ policy – the intention behind auto-enrolment was always that it would be improved over time: that minimum contributions would rise and more people would be brought into the system.
“As things stand, people with defined contribution workplace pensions into which they have been auto-enrolled can be pleased they will have something to show for it in retirement, but need to understand it might not be enough for a good standard of living.
“In some respects, auto-enrolment has lulled people into a false sense of security that their pension is all taken care of. In reality, they may still need to boost their provision by contributing more than the minimum or investing in other products, such as ISAs, too. Being auto-enrolled is really just the beginning of the retirement story.”
Read the ABI report.
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