Auto-enrolment review to consider how self-employed can save for retirement

12 December 2016

The government is stepping up its campaign to get more people saving for a pension, with a review of its auto-enrolment scheme.

The announcement follows comments last month from pensions minister, Richard Harrington, suggesting that the UK’s 4.8 million self-employed workers needed to be encouraged to save in the same ways as their employed peers.


Auto-enrolment forces employers to set up a pension for their staff and make contributions on their behalf, and unlike most schemes previously, all eligible workers are signed up automatically and must opt out themselves if they don’t want to contribute.

It is thought that by getting workers to opt out, rather than opt in to their workplace pension, more will participate. Since October 2012, when the scheme started to be phased in, close to seven million workers have started to save for retirement. By 2018, this figure is expected to have reached 10 million.


Self-employed and those with multiple jobs missing out

However, there is concern that some people might be missing out – for example the self-employed and those with multiple jobs who do not earn enough from each individual role to be eligible for auto-enrolment.

Currently workers are only automatically enrolled onto their employer’s pension once their salary exceeds £10,000 a year.

The review will consider how these people can be helped to save for retirement.

Commenting on the announcement, secretary of state for work and pensions, Damian Green says: “Pensioner poverty has more than halved since the late 1980s, which is a record to be proud of. We need to secure this legacy for future generations.

“After years of people not saving enough, automatic enrolment is helping millions of people, many of whom are low earners, benefit from a workplace pension. This will continue to boost retirement pots and help safeguard people’s standard of living in later life.”

People need to save more

However, Kate Smith, head of pensions at Aegon says that the government doesn’t just need to focus on getting more people to save, it also needs to get people saving more.

She says: “Auto-enrolment contributions are set to rise by 2019 to 8% of a band of earnings between £5,876 and £45,000, but that won’t be enough to give most people an adequate income in retirement. One simple way to increase contributions would be to gradually move to a position where the 8% is on all earnings with no initial earnings excluded.”   

Earlier this year, research from Royal London revealed that a 22-year old worker would need to work until they were 77 to achieve a pension equal to two-thirds of their salary if they only paid in 8% of their income. To get half their income they would still need to work until they were 71.


The Pensions and Lifetime Savings Association recently recommended that contribution rates are increased to 12% at least.

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