Automatic enrolment  

Record employment to increase pension savings

Record employment to increase pension savings

According to the Office for National Statistics (ONS), the number of people in work is at the highest level since records began in 1971, which should boost pension savings.

The ONS figures showed that the employment rate is at a record high of 75.1 per cent, with 32.07 million people now in work – an increase of 338,000 on the year.

According to Kate Smith, head of pensions at Aegon, these positive numbers are “great news for not only the economy but for the UK pension gap.”

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“Most jobs come with the opportunity to save into a pension since the roll out of auto-enrolment, so with employment numbers on the rise we should start to see pension saving on the rise too,” she said.

The government has previously announced that the minimum automatic enrolment contributions will increase to 5 per cent in 2018 and 8 per cent in 2019.

A total of £17bn a year will be going into workplace pensions by 2019 to 2020 as a result of auto-enrolment.

Ms Smith said: “The next two years will be crucial for auto-enrolment as we see the impact of increases to contribution levels for employees […] and how workplace savers and their employers respond to this.”

The UK employment rate is now the fourth highest in the European Union and 7 percentage points higher than the EU28 average.

Despite the positive numbers, Ms Smith warns that the “proportion of the workforce that might be low earners, as well as the growing numbers of self-employed and gig economy workers” should be considered.

These individuals are therefore not eligible for auto-enrolment, and they do not benefit from an employer contribution, a valuable boost to pension saving, she said.

“These issues need to be addressed so that everyone has the opportunity to save for their retirement no matter where they work,” she concluded.

Research recently published by the Department of Work and Pensions (DWP) shows that 80 per cent of employees are positive about the benefits of being enrolled into a workplace pension.