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Employee Benefits News

Latest News
06 Aug 2012

UK Pension Income To Double Thanks To Auto-Enrolment

As a result of automatic enrolment, private retirement income in the UK could rise almost two times by the time Britons that start work today become pensioners, research by the Department for Work and Pensions (DWP) has shown.

According to DWP's estimates, auto-enrolment could bring median private pension income to between £153 and £195 a week by 2070. In comparison, without the planned measures, median weekly private pension income would only rise to between £86 and £106.

The study, Workplace Pension Reforms: Baseline Evaluation Report, showed that 74% of large employers support the reforms, while among micro employers backing for the auto-enrolment was only 44%. The first to be brought into the reforms are large employers, with auto-enrolment for them coming into effect from October 2012.

More than 90% of employers that make contributions of 3% or more would not lower contribution levels for existing members in spite of the expected rise in total contribution costs, according to the research. The additional contribution costs are expected to be around £4.0 billion per year.

Some 65% of individuals are likely to continue saving in a workplace pension scheme, according to the study. Among respondents who were undecided or said they would probably or definitely opt out of workplace schemes, only 9% would definitely opt out.

The findings come as private sector pension participation has declined to 5.8 million, or 42%, in 2011 from 7.9 million, or 55%, in 2003. In addition, workplace pension saving in the private sector has dropped to £35 billion in 2011 from £39.3 billion in 2007.

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