Workplace pension figures from the ONS
06 Sep 2018
Commenting on ONS workplace pension contribution figures released today, Paul Waters, Head of Guided Outcomes, Hymans Robertson, says:
“It is great to see that auto enrolment continues to successfully encourage more employers to help more people save for their retirement, but there is no time to relax and think that this is ‘job done’. In reality, with more employers providing AE pensions, many will be believing that their pension contributions will provide them with a comfortable income in retirement. Instead, they will be surprised to find, when they retire, that they simply haven’t saved enough. Now we must address the challenge of ensuring, and encouraging, people to increase their savings to meaningful levels that will provide them with adequate retirement incomes.
“As the figures show, while the overall amount being saved into DC pensions increased in 2017 the average total contribution rate was 3.4%, falling from 4.2% in 2016. Even with the increase in contributions levels to 5% in April, and a further increase to 8% in 2019, people will be massively under-saving. The reduction of the AE starting age to 18 and changing the entry threshold to base contributions which are due to be implemented, will help. These moves alone, however, will not achieve enough and other measures, such as pushing out the target retirement date to coincide with their State Pension Age and further increasing contributions to a total of 12%, will be needed to achieve an adequate income in retirement. At 12% we would begin to see a contribution that will have a meaningful impact for employees’ retirement savings. At that level we can see far greater certainty of them reaching a target income that they can live on in retirement.
“Employers, the industry and Government must focus on helping people to save enough for retirement and not presume that the AE default rates mean everything is going to be rosy when they finish working. Collectively we have the tools, we need to use them.”