The UK’s automatic enrolment regime was not affected by April’s increase in minimum contributions, according to data from the country’s top three providers.
Figures from NEST, NOW: Pensions and The People’s Pension – collated by trade body the Pensions and Lifetime Savings Association (PLSA) – showed a minimal rise in members stopping their contributions after the contribution increase.
The PLSA reported that the proportion of people who stopped contributing to their pension rose from 3.3% in the first quarter of 2018 to 3.5% in the second quarter.
All this suggests the impact of higher contributions on savers’ behaviour has been smaller than anticipated.
From 6 April, the minimum contribution for staff automatically enrolled into a workplace pension scheme rose from 2% to 5%, made up of 3% from the employee and 2% from the employer.
Data on members opting out of their scheme – classed as the number of people who leave the pension scheme within one month of joining – remained steady at 6.2% in the three months immediately following the contribution increase.
In April 2019, the total contribution will rise again to 8% of salary.
This year’s increase could mean someone on average earnings ends up with a pension pot of £80,000 instead of £32,000.
With small numbers making such a big difference, and many people saving for the first time, it’s vital industry and government continue to work together to sustain savers’ confidence in pensions and help people achieve the retirement they want.
The Pensions Regulator has estimated that auto-enrolment has brought nearly 10m people into retirement savings for the first time.