There have been some concerns lest the increase in contributions to auto-enrolled pensions schemes cause a mass departure by employees.  However, experts have stated that they believe it is unlikely that this will happen.

Employees appear to have accepted the increase in minimum contributions - which took place in April - from 2 per cent to 5 per cent (with the employer’s contribution rising from 1 per cent to 2 per cent).

According to research by pensions and investment firm Aegon, it was found that UK workers have welcomed auto-enrolment - to the extent that 25 per cent said that being auto-enrolled was the nudge they needed to save for retirement.

In addition, it showed that the average worker is willing to pay a 7 per cent contribution with nearly one in six of those in their 20’s willing to pay between 11 per cent and 15 per cent of their salary towards saving for their pension.                                                                                    

Head of Pensions at Aegon – Kate Smith – said:

“There was some concern that increasing auto-enrolment contributions for employees would result in some people stopping their contributions. However, our research is a strong endorsement that not only will people take the increases in their stride, they’re realistic to appreciate that a comfortable retirement requires saving at higher rates and are prepared to pay more.”

She said that the company’s books reveal that few people have opted out of their workplace schemes and that the opt-out rates for new members had “slightly gone up, but it was marginal”.

She added:

“We did a lot of media around April when the pension’s contributions increased. We emphasised that staying in meant that not only would you be saving more, but Aegon would be contributing more as well. I understand for a lot of people that saving can be an affordability issue, but we haven’t seen a lot of changes in our numbers. We are concerned about what will happen next April when rates go up again.” 

Chris Curry - Director at The Pensions Institute - believes that the principle of opting out of a system, rather than joining in, seems to play an important part in the number of people remaining in their workplace pensions.

He stated:

“Inertia still seems to be playing an important role, almost certainly helped by the fact that other changes, such as changes in income tax and national insurance, will have partially offset increased pensions contributions. We shouldn’t be complacent – there is little data to go on at the moment, and people may take a little time to respond to the change.”

Aegon’s survey consisted of 14,400 employees and 1,600 retired people in 15 countries.  Globally, it found that workers in the UK were the second most likely to give – as their reasons for saving for retirement – employment-related reasons. 

Kate Smith stated:

“Saving in a pension through your employer has become a natural part of working life in the UK today, with people embracing saving in this way. There’s also a growing appreciation that the level of retirement income is dependent on the contributions individuals and their employer make throughout their career, leading to a desire to pay more.”

Ros Altmann - former Minister of State for Work and Pensions - said it was encouraging to see such low opt-out rates after the increase in contributions.

She added:

“It is now up to pension providers to ensure workers have a positive experience of pensions, and I encourage employers to explain the benefits and extra money which they are providing for their staff.”