In its annual analysis of all qualifying workplace pension members over the past 10 years, the UK’s Department for Work & Pensions (DWP) found that automatic enrollment has boosted pension participation by more than 50% between 2012 and 2016.
The UK introduced automatic enrollment in 2012 to help reverse a trend in declining private pension saving, and to help normalize long-term savings. It started with the largest employers, with all remaining employers in existence as of April 2012 required to meet their enrolment duties by February 2018. Nearly 8 million workers have been automatically enrolled, and more than 598,000 employers have met their automatic enrollment duties, reports the DWP.
Between 2006 and 2012, there was a general downward trend in workplace pension participation, according to the DWP, from 62% (12 million eligible employees) to a low of 55% (10.7 million). However, since automatic enrollment was adopted in 2012, there has been a sharp increase in pension participants, as the total number of eligible employees participating in a workplace pension soared by more than 5.4 million to 16.2 million in 2016, or 78% of all eligible employees.
Public sector participation rates have remained stable over the past 10 years, according to the DWP, and the largest public-sector increase between 2015 and 2016 (4%) was seen among companies with between five and 49 employees. The highest level of private-sector participation in 2016 was reported in companies with 5,000 or more employees, with 89% of eligible employees participating. After yearly increases since 2012, there was a decrease of 2% in participation rates between 2015 and 2016 among companies with between 250 and 4,999 employees.
The report also found that the highest participation levels, in both the public and the private sectors, was among those earning more than £40,000 ($51,000) per year. However, it found that public-sector workers earning between £10,000 and £20,000 saw the largest increases in participation since 2012, although the levels of participation among these workers remains lower than for higher earners.
According to the DWP, 77% of eligible employees are continuing to save persistently, which is defined as saving into a workplace pension in at least three years out of a four-year period. The department’s most recent analysis shows that there has been a small decrease in persistency rates between 2015 and 2016, from 79% to 77%. Meanwhile, the proportion of eligible savers not saving persistently was 1% in 2016. For the remaining 22%, there was not enough evidence for the DWP to judge either way.
The total amount saved for eligible employees in both public and private sectors was £87.1 billion in 2016, a rise of 4.6%, or £3.8 billion from 2015. The public sector increased by £1.8 billion, while the private sector grew by £2 billion.
Tags: auto-enrollment, Pension, UK