More workers than ever are saving for the future but lack of pension awareness is ‘worrying’. A third of workers are not aware they have been auto-enrolled into a workplace pension scheme.
The Office for National Statistics Wealth and Assets Survey reveals that 91% of eligible employees are now saving for the future, but only 63% realise they have been automatically enrolled.
Kate Smith, head of pensions at Aegon, says it is "disappointing" that so many people are not aware of the scheme.
She says: "There is more work to do to improve employees’ pension knowledge and understanding. For people to achieve the retirement they aspire to, we need to talk more openly about the value of saving for retirement and encourage more people to take personal responsibility for pension savings. This include making people aware that they have a pension in the first place."
Auto-enrolment was introduced in 2012 and means workers aged 22 and over who earn £10,000 or more are automatically opted into a company pension scheme unless they choose otherwise.
Initially workers contributed just 1% of their salary, but this was increased to 3% in April this year and will rise again to 5% in April 2019, with a 3% employer contribution taking the total minimum contribution to 8% of a worker’s eligible earnings.
There has recently been talk around whether the scheme should be extended to the self-employed as it is feared around five million of these workers are not saving for the future.
Some 40% of respondents to the ONS survey say a workplace pension is the safest way to save for retirement, with a further 29% favouring property.
Some 13% say they don’t know enough about pensions to save into one, 7% think it’s too early to start saving for retirement and 3% think it’s too late.
Tom Selby, senior analyst at AJ Bell, adds: "The growing number of people reporting a lack of understandings about pensions is worrying, particularly when you consider the introduction of pension freedoms. Poor engagement risks poor decisions – or no decision at all – resulting in an increased likelihood of poor outcomes in retirement."
This article first appeared on our sister website Money Observer.