Figures published recently by the Prudential have shown a significant increase in the total amount put away by UK workers towards their pension pots.
UK workers’ pension contributions last year amounted to more than £9.3 billion – a 17 per cent increase on the 2010/11 tax year and the second highest figure in the last 25 years.
Prudential has said that these figures “can be attributed in part to the initial success of auto-enrolment in encouraging more workers to save for their retirement.”
The firm added that auto-enrolment “immediately began to reverse a trend that had seen the total number of pension savers in the UK fall by 32 per cent, from 7.8 million to 5.3 million in the 10 years to the end of the 2011/12 tax year. By April 2014 the figure had recovered to more than 6.4 million.”
Stan Russell of Prudential said: “After taking a long time to recover after the shock of the financial crisis, it appears that workers in the UK are starting to catch the pension savings bug again.
“Now, more than ever, it is important for those looking to secure a comfortable retirement to save as much as possible as early as possible into a pension.
“With fewer people benefiting from final salary pensions and faced with volatile financial markets, especially following the result of the EU referendum, saving into a personal or workplace pension is something I would encourage all workers to strongly consider.”
Robert Bradman Partner at Wilder Coe says:
“Although this is good news, there is also concern that the contribution rates of those who have already been auto enrolled are too low to give people a sufficient pension for when they retire.
At present the minimum contribution rates are 1% of pay by both the employer and the employee. These rates are due to increase to 3% by the employer and 2% by the employee in 2018, increasing further to 5% and 3% respectively in 2019. Up until last year it was mainly the larger employers with 50 or more employees who have been required to set up qualifying workplace (auto enrolment) pension schemes. However all smaller employers will now have been provided with dates in 2016 and 2017 set by The Pensions Regulator by when they must have a qualifying scheme in place.
It will be interesting to see going forward what impact these increased contribution rates will have, as too high a reduction in employees take home pay may result in more employees choosing to opt out of the auto enrolment process altogether, thereby defeating its purpose.”