Four years on from the launch of auto-enrolment, headline statistics only tell half of the story. More than 6.7 million employees are now enrolled in workplace pension schemes, according to the Department for Work and Pensions (DWP), and that figure is predicted to rise to 10 million by 2020 as more and more small businesses come onboard.
This is widely seen as a successful first step in the policy’s attempts to get more people saving for retirement – and to get that saving process started earlier.
With the state pension age being pushed further and further back, the impulse behind the policy is a sensible one. But financial advisers who are familiar with the general public’s lack of financial knowhow may find another datapoint more revealing: a mere 7 per cent of participants say they know “a great deal” about the policy, according to figures from the Office for National Statistics.
Part of this, of course, is due to the requirement to opt-in employees to the scheme, and the low minimum contribution rate. But as the number of participants rises, more questions are being asked over the viability of certain schemes, how prepared schemes are for a further influx of members, and the structure of the system itself.
Next year will be a pivotal one for the process. A planned increase in minimum contributions may have been pushed back to April 2018, but 2017 will still herald government reviews of Nest and AE, stricter regulation for master trusts, the introduction of the Lifetime Isa, and a quadrupling of the number of participating employers to more than 1 million.
For now, though, the industry appears to have adapted well to the first wave of small businesses coming on board.
A model of stability?
Table 1 covers a range of information about the schemes surveyed, including member charges, minimum contributions and minimal annual premiums.
The requirements for the minimum number of employees per scheme have crept up in recent years, according to previous Money Management surveys, but there is little concrete evidence of this trend in 2016. Aegon has shifted from a five-employee minimum in 2013, to zero in 2014, then back to five again last year and 10 this year. However, no other providers have increased their requirements, and Scottish Widows has reduced the number for its group personal pension plan from 20 to five. Minimum total annual premiums per scheme are also stable.
