17th July 2014
The number of workers saving into company pension schemes may double by 2030 if current auto-enrolment trends continue, research from the Pensions Policy Institute (PPI) has found.
Employees do not have to join their workplace scheme and presently the opt-out rate is around 9-10%. But if this average holds tight, the PPI estimate that 8.5m people could be newly saving into a pension by 2030 and there could be 15m people actively saving into private sector workplace pension schemes, known as defined contribution plans, the fortunes of which are linked to the stockmarket.
However, if opt out rates rise to 25% there might only be 6.5m new savers in 2030, out of a total of 13m private sector workplace pension active savers.
Under these different opt out scenarios, by 2030 the value of assets in private sector defined contribution workplace pension schemes could range between £455bn and £495bn compared to around £350bn without automatic enrolment.
Many employers with existing provisions are currently automatically enrolling their employees into their existing schemes and paying contributions at levels higher than the minimum required under automatic enrolment regulations. However, many employers without existing provision have stated their intention to automatically enrol their employees on minimum required contributions.
Daniela Silcock, senior policy researcher at the PPI said “This research shows that DC pensions will play a much greater role in private sector pension saving in future, though the decisions made by employers and employees will affect the total scale of saving and the value of assets in schemes. Based on reasonable assumptions about opt out rates, we could see up to 15m people actively saving in private sector workplace schemes by 2030, with up to 8.5m of these newly saving, and up to £495bn in DC assets. This is a phenomenal change to the pensions landscape when you consider that without automatic enrolment there might be around 6m DC savers and £350bn in DC assets by 2030.”
Nigel Wilson, group chief executive of Legal & General Group Plc added: “Auto-enrolment is a tremendous success, and shows what can be achieved when the government, regulator and the industry engage in deep collaboration. People though do need to make higher contributions and retire later, if they are to achieve the retirement income they desire.”