Auto-enrolment reaches major milestone
More than 10 million people have been automatically enrolled into a workplace pension, according to newly released figures.
Auto-enrolment started in October 2012, with larger employers the first to add their eligible employees to workplace pensions.
Over time, smaller employers have been phased in too, with the legislation now covering employers of all sizes in the UK.
The 10 million figure came from Work and Pensions Secretary Amber Rudd, who confirmed the milestone, had been reached in a tweet.
Sharing an infographic with a counter reaching 10 million, Rudd said: "New stats out today show auto-enrolment is a soaraway success. Thanks to the Conservative Party 10 million workers can look forward to a more secure and better retirement."
Auto-enrolment was introduced due to recognition that most people were not saving enough for retirement.
As a result of this retirement savings gap, people would be unable to live comfortably in later life, relying solely on the State Pension as their main source of income.
With people living longer on average, the State Pension system is coming under growing financial pressure, which makes private pension provision increasingly important.
Commenting on the milestone, Alistair McQueen, Head of Savings and Retirement at Aviva, said:
"Seeing 10 million people auto-enrolled into a workplace pension is a significant landmark. It is testimony to the hard work of employers, pension providers and government that the take up of auto-enrolment has been so successful.
"But this is not a time to be complacent. Even with the increase in minimum contributions coming in April, current savings levels will not provide many people with a comfortable retirement. In fact, many people will be facing retirement with an income worth less than the minimum wage.
"While we should celebrate passing the 10 million mark, it is also the time to increase our efforts and continue emphasising to people the importance of saving for retirement."
The legislation which drives auto-enrolment was introduced as part of the Pensions Act 2008. It requires all employers to offer workplace pension schemes and enrol eligible workers into their schemes.
From 6th April 2019, the minimum contributions paid by employers and employees into auto-enrolment workplace pensions will increase.
These increased pension contribution levels will apply to all employers with staff in a pension scheme for auto-enrolment, including those who decided to use an existing pension scheme, rather than establish a new workplace pension.
The new rates will see employer minimum contributions increase from 2% to 3% on eligible earnings. Employee minimum contributions will increase from 3% to 5% of eligible earnings.
The increases result in total minimum contributions rising from 5% to 8%.
Employers are required to ensure at least the minimum level of contributions are paid into the pension scheme. They can however make a higher employer contribution, if they choose, with employees making up any difference to reach the minimum.
Minimum contributions for auto-enrolment purpose are based on a specific range of earnings. For the 2018/19 tax year, this earnings band is between ?6,032 and ?46,350 a year, or ?503 and ?3,863 a month, or ?116 and ?892 a week.
This range of earnings is reviewed each year by the government and the 2019/20 figures are expected to be published shortly.
To discuss your auto-enrolment requirements and to find out how we can help, contact Kellands Corporate.