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Home Finance Workplace pension participation soars under auto-enrolment but further reform needed

Workplace pension participation soars under auto-enrolment but further reform needed

by uma

 

 

 

The workplace pension participation rate in the UK was at 79% (22.6 million employees) in April 2021.

Workplace pension participation was 75% in the private sector. Prior to auto-enrolment it was just 32%.

Participation was much higher for those employees eligible for auto-enrolment. Around 8 in 10 eligible employees had a pension compared with 2 in 10 employees aged 16 to 21 years.

In April 2021, workplace pension participation was the lowest for private sector full-time employees earning £100 to £199 per week (43%). Again, this is because these employees fall below the earnings trigger for auto-enrolment.

If auto-enrolment could be widened out in line with the recommendations of the 2017 Auto-enrolment Review, we would see a big increase for these under-represented groups.

The ONS has released data on Employee Workplace Pensions in the UK: Employee workplace pensions in the UK – Office for National Statistics

 

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown:

 

“Auto-enrolment has been a triumph, with pension participation in the private sector once languishing at a mere 32% now surging to 75%. However, there is still much more to be done as there are still too many people missing out on a workplace pension.

 

Looking closely at the data we see that while eight out of ten eligible employees now have a workplace pension, this falls to just two in ten among those who are currently too young to be auto-enrolled -the under 22s. Similarly, those who fall beneath the earnings trigger of £10,000 are also much less likely to have a workplace pension and so miss out on valuable contributions to their retirement.

 

The government pledged in its 2017 Auto-enrolment Review that it would look to widen out auto-enrolment by lowering the minimum age to 18 and allowing people to contribute from the first pound of their earnings. It is clear these actions would considerably boost participation among these underserved groups and give them the opportunity to save more for longer and build a more resilient retirement as a result. Anyone who feels they can’t afford it is able to opt-out, but the data overwhelmingly shows that the vast majority of people remain in their pension once they’ve been enrolled.

 

However, it has so far been evasive as to the timeline for these potential changes. The review initially gave a mid-2020s timeframe but when pressed on the issue recently the pension minister would only say the reforms would be brought about “in the fullness of time”. These are important next steps in the evolution of auto-enrolment, and they must not be kicked into the long grass.”

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