Automatic Enrolment has prompted more people into saving for their retirement.
New figures show that nearly 5.2 million workers have been enrolled into a workplace pension scheme by their employer as part of the Government reform.
Launched in 2012, Automatic Enrolment initially involved the largest businesses enrolling their staff into a workplace pension scheme into which the employer, worker and the Government would make contributions. The process has since rolled out to medium-sized businesses and will reach small and micro employers from June this year.
By 2018, when the roll-out is complete, it is expected that up to nine million people will be newly saving or saving more, giving them a greater sense of economic security and peace of mind in retirement.
Minister for Pensions Steve Webb said: “Over the past five years we have carried out root and branch reform to create a pensions system that is fit for the future. Millions more people are now putting something by for their retirement.
“People are living longer than ever and it is vital for their future prosperity that they save when they can. Automatic Enrolment is giving people real support to do just that, with the employee, their employer and the Government making regular, affordable and fair contributions.
“New pension freedoms are due to kick-in next month giving savers unprecedented access to their cash. With millions more now saving from an earlier age, people will be much better placed to take full advantage of these freedoms and use their savings in the way that suits them and their family.”
Automatic Enrolment executive director at The Pensions Regulator, Charles Counsell, added:
“The first two years of Automatic Enrolment have been a success with many thousands of employers now helping to change the way we as a nation save for retirement.
“This is no time to rest though as significant challenges lie ahead. The Pensions Regulator is now writing to all employers across the country and calling them to action. Our message to employers is clear – act now and start preparing in good time.”
In a fundamental change of emphasis, automatic enrolment means that instead of choosing whether to join a workplace pension scheme, individuals will have to actively decide that pension saving is not for them and opt out.
Automatic Enrolment has taken the hassle out of the process for the employee and figures show that around 9 out of 10 people who have been automatically enrolled do not opt out of their scheme.
The latest figures released by The Pensions Regulator today show that nearly 45,000 employers have now automatically enrolled their staff.
With people typically having 11 different jobs over their working lives, the Government has also announced that it will roll out a new system to help people keep their savings in one place while they move jobs.
Next year automatic transfers will begin, meaning that an individual’s pension pot will follow them as they move between companies.
Joanna Robinson, managing director of Mansfield Pollard, an engineering and manufacturing company based in Bradford which employs a workforce ranging between 155 and 160, says while Automatic Enrolment has been a positive move, it may prove to be a burden for smaller companies.
"I think the take up has been much higher than anybody anticipated. In our company the take up has bee 70 per cent which is a significant cost to us but we as a company think it is the right thing to do. We want to look after our employees and we want to encourage them to save for their future and we want to contribute to that."
But Joanna says the administration costs of setting the system up may impact on smaller businesses.
John Rogers, Pensions Manager at Yorkshire Building Society, says: “I would say the auto-enrolment system has been really beneficial.
“Before it came into force there were just over 1,000 colleagues – more than a quarter of our workforce - who were not in our pension scheme.
“After the new legislation came in only 161 people took the decision to opt-out which shows what an impact it has had.
“The auto-enrolment system has taken the hassle out of pensions for many of our colleagues and made saving for the future much more common.”
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules here