Fewer than 1% of savers have opted out of their auto-enrolment pension after it went up to 8% last year
Fewer than 1% of savers opted out of their auto-enrolment pension after last year’s contribution hike, according to a government report out today, suggesting employees are sticking with the savings habit.
Today’s report from the Department for Work and Pensions (DWP) shows the percentage of savers actively choosing to stop saving was just 0.76% in the three months following last April’s contribution rate increase.
Since April 2018, when the first increase in minimum contribution rates took place, drop outs have increased most among those aged 22 to 29 and 30 to 39 (0.23 percentage points and 0.15 percentage points, respectively).
The minimum contribution rate is currently 8% of qualifying earnings, of which at least 3% must be paid by the employer. This means if you are opted-in, you contribute 5% from your income, and your employer contributes 3%.
Before April 2019 the rate was 3% from the employee and 2% from their employer. Concern had been raised the increase would spark an exodus of savers opting out. Until April 2018 the rate was 2% and 1%, respectively.
Automatic enrolment was introduced in stages, with larger companies the first required to enrol all employees in a pension scheme in 2012.
More than 10 million more people are now pension saving as a result of the initiative, according to government figures, around 18.7 million employees in total.
Secretary of State for Work and Pensions Therese Coffey says: “Automatic enrolment has been an unparalleled success, transforming pension saving for millions of people.
“The saving habit is sticking too, as people recognise the importance of putting money towards their retirement.
“I want people to save even more, if they can, to make sure the retirement they get is the retirement they want.”
Experts suggest the current minimum auto-enrolment rates fall far short of what savers will need for a comfortable retirement. Figures put forward by the Association of Consulting Actuaries call for total contributions of at least 11%, and closer to 15%.
The DWP is considering lowering the minimum age so that 18-year-old workers will be automatically enrolled into a workplace pension scheme.
The current auto-enrolment regime requires employers to enrol workers who are at least 22 years old and earn over £10,000.