On Friday 6 April 2018 the next stage of automatic enrolment will take place, with minimum contributions rising from 2% to 5%. As a result, an additional £6.4bn will be added to UK savers’ pension pots in 2018/191.
Automatic enrolment has done a great job at helping to reverse the decline in pension saving in the UK so far, and will result in an additional £13.3bn in pension saving by the end of the decade2. However, with 13.6 million people3 currently not saving enough to achieve a decent income in retirement4 phasing is an essential next step in the automatic enrolment journey.
Tim Gosling, Policy Lead: Defined Contribution, Pensions and Lifetime Savings Association, said:
“Automatic enrolment has so far seen nearly 10 million employees enrolled into a workplace pension scheme and benefit from employer contributions. Now it’s time to look to the next stage of the process, where overall pension contributions are set to increase. This step is vital because despite the success of automatic enrolment, the majority of people are still not saving enough to meet their retirement goals.
“During the same month many savers will benefit from other changes, with both the personal allowance for income tax and the national living wage set to rise in April5.
“Workplace pensions remain the best, and simplest, way to save for a good income in retirement. And it is vital that people do not put off saving into a pension until later in life unless absolutely necessary. The longer people save the more they will benefit from employer contributions and the larger their final pot will be.”
NOTES TO EDITORS
1 DWP, Automatic Enrolment Review 2017: Analytical Report
3 Retirement Income Adequacy: Generation by Generation
4 According to the Pension Commission’s target replacement rate
5 The personal allowance is rising from £11,500 to £11,850 from 6 April 2018 and the national living wage will rise from £7.50 to £7.83 on from 1 April 2018.
EXAMPLE PENSION CONTRIBUTIONS
||Lower income saver*
||Median income saver
|| £ 15,268.50
|| £ 28,600.00
|| £ 28,600.00
|Net annual wage after tax and NI
|| £ 13,226.48
|| £ 13,765.26
|| £ 22,729.48
|| £ 22,830.68
|Net annual wage minus pension contributions
|| £ 13,156.49
|| £ 13,543.58
|| £ 22,547.69
|| £ 22,289.05
|Monthly wage minus pension contributions
|| £ 1,096.37
|| £ 1,128.63
|| £ 1,878.97
|| £ 1,857.42
*Lower income saver - minimum wage @37.5 hrs.
ABOUT THE PENSIONS AND LIFETIME SAVINGS ASSOCIATION
We’re the Pensions and Lifetime Savings Association; the national association with a ninety year history of helping pension professionals run better pension schemes. Our members include over 1,300 pension schemes with 20 million members and £1 trillion in assets, and over 400 businesses. They make us the voice for pensions and lifetime savings in Westminster, Whitehall and Brussels.
Our purpose is simple: to help everyone to achieve a better income in retirement. We work to get more money into retirement savings, to get more value out of those savings and to build the confidence and understanding of savers.
Kathryn Mortimer, Press Officer, Pensions and Lifetime Savings Association
T: 020 7601 1748, M: 07901 007713, E: [email protected]
Eleanor Carric, PR Manager, Pensions and Lifetime Savings Association
T: 020 7601 1718, M: 07825 171 446, E: mailto:[email protected]