There have been great successes with AE, however, over a decade into the delivery and it’s clear that the full extent of the original vision of the Pensions Commission has not come to pass. There are still individuals who will not achieve adequate retirement incomes. DWP research found that 38% of working age people (equivalent to 12.5 million) are undersaving for retirement when measured against Target Replacement Rates Before Housing Costs[1].
“Whilst auto-enrolment successfully harnesses inertia, resulting in millions of people saving at that minimum - a key part of the Pensions Commission vision was that people would save over and above the statutory level. But the age-old challenge of active engagement and ‘saving more’ remains. This is an important conundrum to address, especially given the UK AE system has significantly lower levels of contributions compared to other similar systems. For example, in Australia minimum contribution rates are 11% (moving to 12% on 1 July 2025) and in Sweden are 18.5%.
“The cost of living crisis undoubtedly makes this a difficult topic to explore. But that is why a Roadmap for the future of AE, detailing how contributions could potentially increase over time and how the scope of AE could be expanded, is urgently needed. It is not necessarily about making changes immediately – it is about exploring a range of options, the issues including impacts on savers and employers, what factors should be considered to support change, building consensus, and mapping out a future that we can all plan for. It’s vital that the overarching system works for all and that the unifying nature of the original AE vision for pensions provision is not left behind. In 2024 NOW: Pensions will develop proposals on the future of AE and how it can continue to evolve to support savers and employers.”
[1] https://www.gov.uk/government/statistics/analysis-of-future-pension-incomes/analysis-of-future-pension-incomes
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