The Office for National Statistics has today released figures today that has shown the effect of auto enrolment on UK.
At first glance, the figures below may look like the introduction of auto enrolment has had a negative effect, with the median total contribution rates to workplace pensions reducing.
Median Total Contribution Rates To Workplace Pensions By Age Group, 2005-2014, Great Britain
|Age ||2005 ||2006 ||2007 ||2008 ||2009 ||2010 ||2011 ||2012 ||2013 ||2014 |
|22-29 ||16.6 ||18.0 ||18.8 ||19.0 ||19.0 ||19.0 ||19.0 ||19.0 ||15.5 ||8.2 |
|30-39 ||17.6 ||18.4 ||19.5 ||19.5 ||20.0 ||20.0 ||20.0 ||19.8 ||19.3 ||13.7 |
|40-49 ||18.6 ||19.5 ||20.0 ||20.4 ||20.5 ||20.5 ||20.3 ||20.5 ||20.7 ||19.0 |
|50 to spa ||19.4 ||19.5 ||20.0 ||20.5 ||20.5 ||20.5 ||20.5 ||20.6 ||20.8 ||19.6 |
Source: Annual Survey of Hours and Earnings, Office for National Statistics
However, it's actually quite the reverse. According to figures released by the Department of Work and Pensions this week, since the inception of auto enrolment in 2012 there has been an increase of people participating in workplace pensions from 42% in 2012 to 63% in 2014. This significant increase reversed the previous trend that saw the numbers of people contributing to a workplace pension declining year on year.
So why, with a dramatic increase of people contributing to workplace pension schemes are we seeing a decrease in the median rate of contributions? This is essentially down to the fact that the majority of new savers are contributing at the minimum levels. However, this median amount will almost certainly increase as the minimum levels increase during the phasing in process.
It remains to be seen however if savers will eventually contribute more than their required minimum, as for most savers, even when the minimum contribution levels increase during the phasing in process, they will need to save more into their pension pot if they are to have an 'adequate' pension to retire on. Despite this, it must be remembered that the retirement prospects for many people who may never have made the effort to save themselves are brighter since the introduction of automatic enrolment.