Pension auto-enrolment shoots higher but men still lag behind women
According to the pension advisory service, automatic enrolment was phased in from 2012, starting with the largest employers in the UK. The scheme has been ramped up since then and by 1 February 2018 all eligible workers should have been enrolled into a workplace pension scheme.
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The rules for automatic enrolment detail that the employer must automatically enrol every eligible worker into the scheme while making a minimum contribution to the pot.
There is tax relief on contributions to the scheme, making it a very attractive option for retirement savings overall.
The department for work and pensions (DWP) recently released a report evaluating the automatic enrolment initiative for 2019. On first glance, the scheme appears to be a success.
As the DWP detail: “Since the start of automatic enrolment in 2012, more than 10.2 million workers have been automatically enrolled, and over 1.6 million employers have met their duties, with 709,000 workers having been automatically re-enrolled and 342,855 employers having met their re-enrolment duties by the end of 2019.
“Levels of awareness and understanding of automatic enrolment are high. In particular, at least 91 percent of micro, small and medium-sized employers were aware of each individual ongoing duty in relation to automatic enrolment.
“Whilst there were some concerns (mainly in 2013) amongst large employers that ongoing administration tasks relating to automatic enrolment could become a burden, attitudes became increasingly positive as rollout progressed and employers became used to the new processes.
“Most employers interviewed in 2016 and 2018 found the cost and time burden involved with implementing automatic enrolment to be lower than they had initially anticipated.
“Employers were typically aware of both the April 2018 and April 2019 increases in contributions. Generally, employers said that they were confident about being able to pay these new rates which they perceived as a small proportion of their overall costs.
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“Data collected up to 2018 found that the number of eligible employees participating in a workplace pension has increased to 18.7 million (87 percent), up from 10.7 million (55 percent) in 2012.”
So the scheme appears to be beneficial for both workers and employers alike. While the overall report highlighted a general level of positivity, some information was revealed that shows there are issues that remain to be fixed.
Specifically, there is a clear gap between men and women when it comes to auto enrolment. The report found that overall, women have higher participation rates than men, with 88 percent of women auto enrolling compared to 86 percent of men.
However, self-employed women’s active pension participation rates have been consistently lower than men’s, even with the gap appearing to narrow.
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The overall engagement levels with auto-enrolment are very strong but there is still chunks of the community who are in vulnerable positions.
As Maike Currie, the Workplace Investing Director for Fidelity International commented: “Auto-enrolment has swept millions of people into workplace pensions and encouraged greater levels of engagement with retirement planning.
“However, there is still work to be done, and the opportunity to build upon this; while the monthly contributions may be coming out of our pay packets few of us are actually engaged with what happens to our money after that, or optimising the amount we could be contributing under workplace schemes.
“Those in full time work are now actively saving, but many are still in the dark over exactly how much is going into their pension pot or where it is invested.
“For example, over a quarter of women don’t know how much they contribute to their pension each month, while two in ten women have never checked their pension.
“It’s encouraging that more women are contributing to their pension, but unfortunately we still have a gender pensions gap.
“We all need to be doing more to engage with our pensions and ensure that we are saving enough for our future.
“Our Financial Power of Women report found that if a woman saved an extra one percent of their salary into her pension on top each month she could close the gap in retirement.”
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