Britons working in all but the smallest of companies are one step closer to pension freedom from today. Auto-enrolment has completed its busiest stage, with thousands of medium sized companies registering their employees into workplace pension schemes over the last couple of months.
Auto-enrolment began with the nation’s largest employers in October 2012, and around 10 million people will eventually be enrolled into schemes by 2018. Many forecasters expect the scheme to replace the State Pension for those aged 35 or younger. The Government-led scheme was created in order to plug the “pensions gap” – the void between what pensioners need to live in comfort and the funds they actually possess.
The Pensions Regulator’s automatic enrolment Commentary and Analysis Report 2013/14, published today, shows that 99% of companies that were legally required to provide their employers with a retirement savings scheme under auto-enrolment obligations did so.
Nearly 11,000 employers instigated auto-enrolment in the year to March 2014, with a further 4,500 requesting an extra three months in order to complete their duties.
Of those that now provide their employees with a workplace pension, a quarter use a defined-benefit scheme, and three-quarters use a defined-contribution scheme. Some of these may be legacy schemes in existance before auto-enrolment, but topped up with new members.
Charles Counsell, from The Pensions Regulator said there was plenty of good news, with employers keen to ensure they do things properly and low opt-out rates.
“But we know there are challenges ahead,” he admitted. “We will now continue our work over the months ahead to ensure medium and small employers understand their obligations, comply with their legal duties and continue to view non-compliance by other employers as unacceptable.”
Only those workers with less than 50 employees have yet to roll out auto-enrolment.
Retirement Prospects Improve
Pensioner poverty has dramatically improved over the past 15 years according to Think Tank the International Longevity Centre. For the first time in 20 years a higher percentage of young adults were unemployed than those aged between 50 and 64.
Ben Franklin of ILC said the industry should not be complacent however.
“We have made fantastic strides with tackling pensioner poverty over the last 15 years. But future generations may not be so fortunate,” he said. “A combination of high house prices, low levels of saving and working age poverty presents significant challenges for tomorrow’s pensioners.”
Just Retirement’s Stephen Lowe agreed that reform decisions made now must not be taken lightly in order that the downward trend of pensioner poverty continues.
“Australia proves that if you give people the freedom to take as much from their pension as they want, then significant numbers will take it,” said Lowe. “On average, about one-third of superannuation assets are withdrawn before people reach State Pension age. And a quarter of people have depleted their assets by age 70, when they are still likely to have many years to live.”
