Jon Greer, head of retirement policy at Quilter, comments on the publication from the DWP which looks at the ten years of Automatic Enrolment in workplace pensions:
“The introduction of Automatic enrolment (AE) was arguably one of the most important and transformational changes to pension policy in the last decade. It has been hugely successful by dramatically increasing the number of people saving for their own retirement.
New data out today, explores how AE has evolved over the last decade and shows that participation has increased among private sector eligible employees in every industry and occupation between 2012 and 2021. Staggeringly, the total annual workplace pension contribution of all private sector eligible employees has increased in real terms from £41.5 billion in 2012 to £62.3 billion in 2021.
While this is naturally a positive thing, AE faces its biggest challenge yet as the cost-of-living crisis grips the nation.
There is a risk that as finances get stretched people choose to opt out of funding their retirement and choose to have that cash in their pocket today. One of the reasons AE has worked is because it relies on people’s inertia but when push comes to shove and people are financially struggling the worry is they take action and reduce or stop funding their retirement plans altogether.
There also continues to big differences between the genders when it comes to pension savings. For example, according to this data within the private sector, real terms total annual savings for males were greater than total annual savings for females, in both 2012 and 2021. Annual savings for males within the private sector increased from £29.8bn in 2012 to £40.2bn in 2021 while savings for females increased from £11.6bn in 2012 to £22.0bn in 2021. A good increase but there is still a huge gulf between the two genders.
Stride must also focus on the fact self-employed people typically save very little for retirement through pensions. While a like for like AE programme for this group of workers would not work, we need to create policies that help this group save more for their retirements.
One of the main hurdles to any evolution of AE or self-employed pension policy is that any changes must be done with Treasury support and input and at present it has often kicked the can down the road or blocked change due to issues with cost. The new secretary of state at the DWP, Mel Stride will have a long to do list as he steps into office to deal with the current crisis, but AE is an area of unfinished business.“