A long way to go
Over 90% of Britain's workforce still unsure about auto-enrolment details
As the April auto-enrolment deadline for employers’ approaches, a recent poll from pensions advice specialist, Portafina1, has revealed the extent of current uncertainty about the Government-managed initiative.
Portafina conducted the research with over 2,000 working Brits1 in January 2017 to find out how many were certain about their workplace pension status, what their attitude toward the scheme is, and how confident they felt that the auto-enrolment initiative would help to safeguard their finances for the future.
The data revealed that 39% were absolutely sure they were already auto-enroled, yet only 16% of all respondents understood how the scheme actually worked – suggesting that at best, less than half of Brits already paying into a scheme are clear on where their hard-earned income is actually going.
Despite the deadline for phasing-in approaching ever-nearer, 95% of Brits polled didn’t know when their employer needed to complete their enrolment onto a scheme. Women were especially unclear (97%) though men weren’t far behind (93%).
Perhaps surprisingly, only 1 in 10 working adults felt glad that auto-enrolment took away some of the hassle of pension-planning, and the vast majority (84%) said they didn’t feel confident that auto-enrolment alone would ensure they had sufficient money in a pension for retirement years. Interestingly, older respondents showed a greater confidence in the scheme, with one in five current pensioners (aged over 65) believing the initiative was a positive move.
With a fresh government review on the regime due later this year, which The Department for Work and Pensions (DWP) said will look at existing coverage and consider the needs of those not currently benefiting from auto-enrolment, development which addresses current concerns is expected to follow.
Jamie Smith-Thompson, managing director at Portafina, said: “When the Government’s review is released I expect it will have a positive outlook on auto-enrolment. The rollout seems to be going as expected, the opt-out rates have been encouragingly low and government research has indicated the vast majority of small and micro employers are now aware of the policy. Portafina recently had its own staging date, and as we already had a workplace pension in place we found it a pain-free process.
“What this new poll has highlighted is that communication around the benefits and limitations of auto-enrolment needs to be massively improved. Our results show that even though people are enrolling, they aren’t confident in the process or what the results will be.
“The benefits of auto-enrolment are real and mean that most people will be funding their own retirement with their employer’s help. This should go a long way to tackling the issue of people retiring with totally inadequate savings, particularly as the contribution levels will increase over the next few years.
“Those who are concerned that their auto-enrolment pension won’t be enough on its own are probably right, though. The reality is it’s still going to be important to talk to a financial adviser to make sure the underlying investments are appropriate and that the pension is performing well. And to look at what else you need to do to save for what will hopefully be a long and happy future retirement.”
In light of the recent study findings, Portafina has shared tips for working Brits still considering auto-enrolment:
1. Check if your company will exceed additional contributions made by yourself. If they will, and you can afford to pay into the scheme, you should go ahead. Higher contributions mean more free money in your pension pot.
2. Be realistic! Even the future auto-enrolment plan of contributing 8% in total (including the employer contribution) is not going to pay for a great standard of living on its own. If you can put more aside then you should, and use a financial adviser to make sure your money invested in the right place (as auto-enrolment schemes are normally “vanilla”).
3. A great way of building your pension for the future is to increase your contributions whenever you get a pay rise. For example, you can put half of the pay increase into your pension and half into your day-to-day living. That way you will not notice the impact of the contributions, and your pension will grow quicker.
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A survey of 1,509 Brits undertaken by independent provider TLF in Autumn 2016.
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