More than eight million people have been auto-enrolled into a workplace pension by more than 500,000 employers, the Department for Work and Pensions announced on Twitter today (13 June).
Pension experts believe this is a great achievement but that coverage needs to be wider and contributions to workplace pension schemes greater.
Steve Webb, director of policy at Royal London, said: 'We should not under-estimate the achievement of getting eight million people enrolled into pensions in less than five years.
"This is another important milestone and getting mass membership of workplace pensions is a crucial step in tackling the under-saving crisis. But there is no room for complacency."
It is vital that the momentum is maintained by finding ways to nudge people into stepping up their pension contributions well beyond the statutory 8 per cent figure.Steve WebbFollowing the hung parliament created by last week's general election, Kate Smith, head of pensions at Aegon, said it shouldn’t be forgotten that auto-enrolment only got off the ground because it had cross-party consensus from the start.
She pointed out all political parties agreed that more needed to be done to reverse the decline in pension savings.
Ms Smith said: "There’s a growing recognition that we need to build on its success to keep the momentum going and help more people to save more, enabling people to have greater financial choices in later life. To do this, it’s absolutely vital that cross-party political consensus is maintained."
Tom McPhail, head of policy at Hargreaves Lansdown, said this is an achievement of which policymakers, employers and the pensions industry should all be proud.
However he said there is still a lot of work to do in broadening the spread of auto-enrolment to encompass the lower paid and self-employed.
Mr McPhail said: "Contributions will need to rise further and the critical challenge of engaging members with their retirement savings has only just begun.
"The Pension Commission's achievement in delivering a consensus for policy intervention also shows how a Savings Commission, looking at a joined up savings and investment policy, could help steer the nation away from debt and towards long-term investing."
But Scott Gallacher, director of Leicester-based Chartered financial planners Rowley Turton, sounded a warning note.
He said: "Auto-enrolment has undoubtedly been a great success to date but I think there’s a danger of being complacent as we are now entering the danger zone, with much smaller employers now having to comply.
"Without the resources of larger firms we could see the wheels of auto-enrolment coming off for these smaller employers."
The Department for Work & Pensions is currently undertaking a review of auto-enrolment headed by Ruston Smith, trustee director at People's Pension, Jamie Jenkins, head of pensions strategy at Standard Life, and Chris Curry, director of the Pensions Policy Institute.
A DWP spokesman said the team is still on track to report by the end of the year.
The review's brief is to explore coverage, engagement and contribution levels.
Royal London's Sir Steve said the top priority for the auto-enrolment review must be " to plan for the world beyond 2019 when the roll-out of automatic enrolment is complete.
"It is vital that the momentum is maintained by finding ways to nudge people into stepping up their pension contributions well beyond the statutory 8 per cent figure.
"As an interim step to boost contributions, there is a strong case for looking at whether contribution rates should apply from the first pound and not just to a band of 'qualifying' earnings.
"This would be of proportionately bigger benefit to lower paid workers. The review also needs to look at the largest excluded group of those who clearly do need pension provision which is the self-employed."
Auto-enrolment applies to workers aged at least 22, but under state pension age, usually working in the UK and earning more than £10,000 a year unless they are already a member of a pension scheme that meets certain criteria set out in law.
A worker who is auto-enrolled into a scheme has the option to opt out of it within one month if they choose.
At the moment, employers and employees must each contribute 1 per cent of an employee’s qualifying earnings until April 2018 when employer minimum contribution rates will rise to 2 per cent with employees contributing 3 per cent.
By April 2019, employers must pay a minimum of 3 per cent of qualifying earnings per employee into a pension scheme with employees contributing 4 per cent with the government adding 2 per cent tax relief.
Employers need to repeat the auto-enrolment process approximately every three years.
stephanie.hawthorne@ft.com
