The number of employees signed up to auto enrolment pensions has hit 7.5m but the low level of contributions by employees and employers is still too small to provide adequate future pension cover
Figures from the Association of British Insurers (ABI) show work-based pensions hit a record high in 2016, with 7.5m policies now in force; an increase of 725,000 policies or almost 11% from 2015.
Premium income also topped a record £13.4bn in 2016, an increase of £1.3bn or just over 11% on 2015, with an increase in the number of individual work-based pensions, mainly due to the introduction of auto enrolment, which forces employers to provide a work-based pension for full-time staff.
However, there are concerns that as people build up so many pension pots with different providers as a result of automatic enrolment it will become increasingly difficult for people to track their multiple pension pots.
The ABI also warns that despite contribution levels rising to 8% in 2019, it will still leave the majority of savers without enough money for retirement. It is important that the government ensures all areas of the workforce benefit from auto enrolment, in particular part-time employees, people with multiple jobs and the self-employed.
Yvonne Braun, director of policy, long-term savings and protection at the ABI, said: ‘The success of automatic enrolment shows how the power of policy can benefit society in the long term.
‘But we cannot let our guard down now. We urge the government to widen the auto enrolment net to help even more people start saving now for their future.
‘We also know 8% of a proportion of earnings is not enough for most. We need the government to set out clear plans to push up contributions after 2019, and to explore how best to engage all workers with saving and planning for their retirement. The Pensions Dashboard services should have a key role here.’
The government is currently working on the development of a Pensions Dashboard service to enable savers to get an overview of all their pension savings online in a single website. The IT infrastructure to support the service is nearing completion but the government still needs to put in place a regulatory framework and legislation before the service can be rolled out to the public.
Sara White