This April will see a further increase to the minimum auto-enrolment pension contribution bringing it to a combined 8% of workers’ take-home pay.
Currently employees pay 3% and their employer contributes 2%. These figures will climb to 5% and 3% respectively from April. However, following an increase last year, opt-outs for workplace pension schemes did not really increase and industry experts – including Stuart Price, Partner and Actuary at Quantum Advisory – believe the same will transpire in 2019.
“I don’t think people will be put off saving for their retirement because of this 2% contribution increase. With a rise in the tax-free personal allowance, the national living wage increasing plus many employers hiking salaries on 1 April, the increase on net take home pay will not be that visible to many individuals.
“I also think people are more educated now. They know they cannot enjoy a comfortable retirement on the State Pension alone, and that they need to save a healthy amount into a pension scheme from as early as possible.
“Last year, the combined 3% contribution increase saw opt outs rise by just 0.4% during the first and second quarters of 2018 and I believe the opt out rate will be low again.
“Although this is the last scheduled contribution increase set out by the government, in my opinion it cannot be the last. Saving 8%, while a great start, is still not nearly enough for people to live on once retired. 12% is a more realistic figure, but at the moment there seems to be no appetite for another increase which is very disappointing and rather worrying. It will be interesting to see how the government keeps people onboard and gets them saving more.”
91% of workers are auto-enrolled on a workplace pension scheme saving £90.3bn last year.
For more information about saving for your retirement, visit: https://quantumadvisory.co.uk.