It's been a long time coming, but finally it's the official launch day of automatic enrolment. Along the way we've had a few wobbles, a number of delays, policy tweaks and a change of government. Despite this sometimes painful process, the political consensus, that automatic enrolment is a good thing and must happen, has managed to hold.
So auto-enrolment is finally here. 1 October 2012 is a fantastic day for UK employees who, beginning with the very largest companies, will, in stages, have the right to an employer pension contribution for the first time.
Ok so it'll take almost five years for all employers to start paying contributions for their employees. And yes, the minimum employer contribution will only be 1% of a band of qualifying earnings, with a matching employee contribution, during this time. And we all know that the full 8% contribution from 2018 onwards won't be enough for most people to provide an adequate income in retirement.
But it's a start, and saving something is better than saving nothing at all.
The latest Office for National Statistics survey showed that the number of pension savers continues to fall year on year. In 2011 there were only 8.2 million employees saving in a workplace pension. In 2006, when concerns were being raised about the downward trend in the number of long-term pension savers, there were 9.2 million workplace pension savers. And it was these concerns which led the Turner Commission to recommend automatic enrolment.
To make automatic enrolment a success we'll all have to work together - government, employers, providers, advisers and employees. Employers will be at the heart of automatic enrolment. They will have to comply with complex rules making sure they do the right thing at the right time. And of course advisers, with support from providers, will be there to help.
We shouldn't underestimate the influence of an engaged employer - this is absolutely critical to the success of automatic enrolment. Engaged employers can do much to help their employees save for retirement; this might be about making higher pension contributions than the statutory minimum, or simply emphasizing the value of saving and encouraging their employees not to opt out. And continuing to talk to their employees about pension saving, so over time helping to make pension saving the norm.
We've got a long way to go to change people's savings behaviour and to get them to really understand why it's so important. But it's better to get people saving now with low contributions to get them into the savings habit, rather than not at all.
Kate Smith, regulatory strategy team, AEGON
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