This week has seen the government hail the success of auto enrolment. Introduced under the coalition government, it has seen millions more people saving for their retirement and just 10% of those auto enrolled choosing to opt out of the scheme.
Parliamentary Under Secretary of State for Pensions, Richard Harrington said:
"It will give around 11million people the opportunity to save into a workplace pension and we expect this to lead to around 10 million people newly saving or saving more by 2018, generating around £17 billion a year more in workplace pension saving by 2019/20."
However, despite the undoubted success of the auto enrolment scheme, it has not been without its critics. The criticism of auto enrolment revolves around how it doesn't go far enough and include more workers. Presently, there are several groups of workers who are not saving enough for retirement and who are also not eligible for auto enrolment. These include:
- Low earners: Anyone who earns less than £10,000 from their job is excluded from auto enrolment. This may include full and part time workers.
- Multiple jobs: Anyone who has multiple jobs in which they earn less than £10,000 per job are excluded from auto enrolment. For example, if someone earned £27,000 per year from three jobs each paying £9000 per year, they would not be eligible for auto enrolment.
- Self-employed: All self-employed workers are not eligible for auto enrolment.
However, the government has now announced a review that will look at auto enrolment and how it may be expanded to include those people and groups who are not currently benefitting from auto enrolment. Richard Harrington commented:
"The main focus of the review will be to ensure that automatic enrolment continues to meet the needs of individual savers. In doing this we will look at the existing coverage of the policy and consider the needs of those not currently benefiting. I would also like to use the review to consider how the growing group of self-employed people can be helped to save for their retirement."
However, care will have to be taken to realise the realities of low wage workers in the UK. Whilst it may look good on the face of it to offer auto enrolment to those people who are on a low income, the fact is that giving up to 4% of their salary towards their retirement savings may not be affordable.
The government review will present its findings in 2017. To learn more about the statutory auto enrolment review 2017 and what it will cover, click here.