Auto-enrolment: It’s not time to say ‘job done’ just yet

Auto-enrolment: It’s not time to say ‘job done’ just yet

It has been a decade since auto-enrolment was introduced and while it has clearly been a success it does not mean there is not more to be done, according to this week’s FTAdviser podcast guests.

Automatic enrolment reached its 10-year anniversary this month and it has been hailed as one of the most successful pensions reforms in recent times.

It has helped encourage more people to save into a pension with 10 million people added to workplace pensions, boosting participation from around 55 per cent in 2012 to 88 per cent in 2021.

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But this does not mean it is perfect and that more cannot be done to encourage more to save.

Appearing on the FTAdviser podcast, Kate Smith, head of pensions at Aegon, said the industry needs to get more people engaged with their pension and then widen the scope of auto-enrolment.

She said: "We have got about 10 million people in the workplace excluded, and all the self employed excluded. So there are generally too many people excluded because they're too young or too old or they don't earn enough or they are self employed. We have really got to do something about that."

Smith said implementing the 2017 reforms would go a long way to plug these gaps but that contributions should also increase sooner rather than later.

She added: “We're one of the few countries where the individual employee pays less than the employer. So we need to rethink that and rebalance. 

She also said the government needs to be cautious about raising contribution rates too high so that low earners do not take the hit.

Tom Selby, head of retirement policy at AJ Bell, agreed with this saying there needs to be a discussion about how to raise contributions.

He said: “The danger is that if you try to do that all very quickly at a point in time when inflation is going through the roof and where lots of people are going to see literally hundreds of pounds a month added to their mortgage costs, if you tell them that they have to pay even 1 percentage point more into their pension that might be enough to break the consensus that saving for retirement is a good thing.”