A new survey conducted by the Association of Consulting Actuaries shows workplace pension savings have largely flatlined over the last decade and reveals concern among professionals that auto-enrolment alone will fail to change this trend.
According to the research, six out of 10 employers now back so-called ‘auto-escalation schemes’, where pension scheme members are encouraged to increase their rate of contributions at a future date in line with increases in earnings to boost saving.
Andrew Vaughan, chairman of the ACA, said with most employers auto-enrolling at the initial minimum level of contributions - 2 per cent of qualifying earnings for employers and 1 per cent for employees - average contributions would actually decline until 2018.
As of 2018 a higher minimum of 8 per cent of qualifying earnings, with 5 per cent coming from employers, will be required in all firms.
The survey of 308 employers showed average rates of contributions into defined contribution pension schemes have changed very little over the last decade, with rates generally failing to keep pace with longer life-spans and an economic climate characterised by lower investment returns.
On auto-enrolment itself, processes involved in preparing for staging dates are ranked as the most problematic area of the reforms, followed by regulatory complexity, which was ranked as the number one problem by smaller employers. Communications with staff ranked fourth overall, but second by large firms.
Eight out of 10 smaller employers were found not yet to have budgeted for the likely increase in costs arising from auto-enrolment.
Mr Vaughan said: “Auto-enrolment on its own isn’t enough. That is why we support the ‘defined ambition’ agenda and the survey is also encouraging in showing employers’ support for auto-escalation schemes.”