The auto-enrolment army of (initially) low-contributing, apathetic savers has marched into the official data on pension contributions, demonstrating the uphill battle facing the industry to secure a decent retirement for today's savers.
As you can see here, a larger proportion of employees – 12 per cent, up from an average of 2.5 per cent between 2009 and 2012 – are now paying less than a fiftieth of their pensionable salary into their workplace pension. In other words, peanuts to get the retirement monkey off their back.
As you can see here, a larger proportion of employees – 12 per cent, up from an average of 2.5 per cent between 2009 and 2012 – are now paying less than a fiftieth of their pensionable salary into their workplace pension. In other words, peanuts to get the retirement monkey off their back.
This is also reflected at the employer level, though the difference is much less dramatic. Now 22 per cent of employers are paying the equivalent of less than 4 per cent of their workers' salary into their pension pot, compared with a 2009-2012 average of 14 per cent:
But at the average level the picture is less severe:
Any reduction is either a result of new pension schemes being created, or perhaps employers reducing the quality of their provision to balance out the cost of extending to all workers: levelling-down.
"Whilst it is not possible to isolate the effect of these reforms, an increase in the number of new members starting pensions on the minimum contribution rates would lower the average rate," the ONS concluded. "The fall may also be due to employers reducing contributions into existing pensions, referred to as levelling down."
Although the agency points to the Department for Work and Pensions' own 2013 survey, which found no particular increase in levelling down since the reform. We'll see.
What these figures do show us is the distance this reform has to go before it starts creating better outcomes. We are already reporting opt-out rates are increasing, if not dramatically, as the auto-enrolment focus recedes – and that is before the higher contributions kick in.
Not to mention that the 8 per cent destination is seen as inadequate by an increasing number of organisations. This picture should improve, but by how much is anyone's guess.
