Auto-enrolment is one of several recent milestones that have marked the UK’s move towards the creation of a savings culture, adviser Alan Higham has said.
Mr Higham, founder of Milton Keynes-based Retirement Angels and retirement director for Fidelity Worldwide Investment said that AE will help to ensure that “savers across a variety of ages will achieve better outcomes as a result of the overall reform programme”.
He said: “While debate has taken place around who benefits from auto-enrolment, crunching the numbers across a variety of ages shows that saving little and often in a tax-efficient manner will allow people to enjoy a better standard of living than they would have done in the past.”
His comments came on the two-year anniversary of the implementation of auto-enrolment, which began in October 2012. Figures from the National Employment Savings Trust suggest that, two years into the regime, there is now a “pension paradox” at play among small and micro businesses in the UK - the last section of employers to begin auto-enrolling their staff.
According to Tim Jones, chief executive of Nest, although small and micro employers have the lowest pension provision, with 74 per cent failing to offer a workplace pension, the majority of bosses - 69 per cent - agree that every worker should have access to a workplace pension scheme.
In 2015, 45,000 small and micro UK businesses will come under the new workplace pension duties.
Mr Jones added: “We are two years into the roll-out and the largest businesses in the UK have already enrolled 4.5m workers. Next year will see a real shift; small and micro businesses who traditionally have no or little pension experience will be stepping up to the plate.
“This research suggests that despite very few offering a workplace pension there is a desire to help their workers save for their retirement.”
Saving little and often: Fidelity’s calculations
Age start | Fund at 67 | Tax free cash | Income to age 90 | Death benefit at age 70 | Death benefit at age 80 |
22 | 204,000 | 51,000 | 11,100 | 130,000 | 60,000 |
30 | 150,000 | 37,500 | 8,100 | 95,000 | 44,000 |
35 | 120,000 | 30,000 | 6,500 | 76,000 | 35,000 |
40 | 94,000 | 23,500 | 5,100 | 60,000 | 27,500 |
45 | 71,000 | 17,750 | 3,900 | 45,000 | 21,000 |
50 | 51,000 | 12,750 | 2,800 | 32,000 | 15,000 |
Adviser view
Mark Ireland, financial planning consultant for Hertfordshire-based Richmond House Financial Services, said: “Much has happened in the world of pensions in the two years since AE came in.
“For those of us working in this space there have been times of utter frustration at the pensions industry’s ability to deliver on its promises, personal exuberance at delivering a service to new stagers with an AE solution ‘on time’ and utter bewilderment at why the powers that be might use the middle of AE to doggedly continue to pursue a charging cap.”
