Since the introduction of auto enrolment in 2012, nine million people have been opted in to a workplace pension in the UK. Next month (April 2018) sees pension contributions increasing from the current 2%, to 5% made up of 3% from the employee and 2% from the employer. The following year this will grow to 5% and 3% respectively, totalling 8%.
Stuart Price, Partner and Actuary at Quantum, looks into the possible repercussions of the increases:
“The current auto-enrolment system sees those aged between 22 and state pension age and earning more than £10,000 pay a minimum 1% of their earnings into a pension scheme, while their employer also contributes 1%. There is certainly a risk that as the minimum contribution levels increase, so too will the number of people opting out of a workplace pension arrangement. Increasing rates also places more financial burden on employers in these uncertain times. However, in my opinion, even after the increases the contributions are nowhere near high enough and lull people into a false sense of security that they will be able to enjoy a comfortable retirement.”