54% of 22-29 year olds are now in workplace pensions
Last Wednesday’s post, “Has auto-enrolment narrowed the gender gap in retirement?” looked at how the government initiative has affected levels of participation in workplace pensions between men and women. The report from the Department for Work and Pensions (DWP) also reveals the impact it has had on pension saving among different age groups.
Many people in the UK are not saving enough for retirement, or in some cases not saving anything at all. Auto-enrolment aims to rectify this problem by enrolling eligible employees into workplace pensions whereby the employee and their employer will make regular contributions, with the added benefit of tax relief.
Levels of participation in workplace pensions
Young people in particular are likely to delay saving for retirement as they have other financial goals and responsibilities, such as saving for a mortgage. From 2004 to 2012 there was a downward trend in the number of young people saving into a pension, as shown in the graph below. However, from 2013 to 2014 there was a 24% upsurge in participation among young people; 54% of eligible people aged 22 to 29 are now enrolled. This coincides with the introduction of auto-enrolment and is the largest percentage increase across all age bands in the private sector.
Percentage of eligible employees participating in the private sector
The graph above shows an increase in participation across all age groups, with 64% of eligible people aged 30 to 39 now enrolled, compared to just 45% in 2013. Participation of 40 to 49 year olds increased from 52% to 66%, which is similar to the increase from 53% to 65% for people aged between 50 and state pension age.
Levels of participation in the public sector have remained relatively high since 2004 with very little fluctuation. Nonetheless, auto-enrolment has had a small impact on the percentage of eligible employees aged 22 to 29 that are enrolled; the graph below shows public sector participation increasing by 3% to 87% from 2013 to 2014:
Percentage of eligible employees participating in the public sector
Trends in pension saving
The total amount of money that has been saved into a workplace pension reached £80.3 billion in 2014. Savings in the private sector increased by £3.1 billion to £42.9 billion between 2013 and 2014, whilst savings in the public sector fell by £0.5 billion in the same period, which could be a result of job cuts in the public sector.
Although the implementation of auto-enrolment is not yet complete, it has already had a positive impact on levels of participation and retirement savings. This is particularly so in the private sector, and especially among younger employees who would not typically enrol themselves into a workplace pension but are now willingly participating.
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The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article. For our latest information and news, please see our articles section: https://www.portafina.co.uk/whats-new
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