Auto Enrolment Contribution Levels To Rise In April

16 March 2018

Contribution Levels To Rise Next month will see the contribution levels of those who are auto enrolled in a pension rise from 2% to 5%. This has raised concerns in some areas that there could be a sharp rise in the number of people who choose to opt-out of their workplace pensions. However, many people, including the former pensions minister responsible for the introduction of auto enrolment think that such worries are unfounded.

Auto enrolment was introduced in 2012 by the coalition government, and since then, nine million workers have been paying the minimum into their pension, 1%, while their employer also pays 1%. To date, drop out rates have been much less than expected, with just 10% of those workers eligible for auto enrolment choosing to opt-out.

However, from April the overall minimum contribution level will increase, ring to a total of 5% (employees contributing 3%, employers contributing 2%). These will rise even further in April 2019, rising to 8% (5% from employees and 3% from employers).

It is thought that there will be an inevitable rise in the number of workers opting out of their workplace pension, with the government predicting that the opt-out rate will increase from the current figure of 10% to 22% after April 2018 and 27.5% after April 2019. However, the former pensions minister Sir Steve Webb thinks that these figures are incorrect and that the majority of people will take the increase in their pension contributions "in their stride", as their overall take-home income rises. The national living wage, for example, is set to increase by 4.4% in April.

Steve Webb, director of policy at Royal London, says:

"The power of inertia remains strong – individuals will still have to actively opt out and the additional amounts they are being asked to contribute are still relatively modest, especially for the lowest paid workers who will be receiving a large increase through the national living wage."

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    • Sp avatar Josh Pedlar

      Josh was a Business Development Manager at Smart Pension. Josh served as Smart Pension's Business Development Manager from November …