The number of workers automatically enrolled into a workplace pension scheme has already reached the million mark, the Pensions Regulator has stated.
Automatic enrolment was introduced in October last year – to encourage more individuals to save towards their retirement.
The UK’s largest firms are the first to have to enrol their workers.
Automatic enrolment then gradually rolls out across medium sized and smaller businesses in the years leading up to 2018.
Minister for pensions Steve Webb said: “This is a real landmark in this quiet revolution, finally reversing decades of decline in pension saving. This is the biggest change to the pensions system for a century. The money workers save is being matched by contributions from their employers and topped-up by tax relief, helping them put money aside for their retirement, many for the first time.”
Interestingly, the automatic enrolment ‘push’ comes amid shocking new claims over the amounts people will need to save for their retirement (http://uk.finance.yahoo.com/news/824-a-month–the-cost-to-save-a-decent-pension-125856156.html).
According to reports, the average 30-year-old must put away a mammoth £824 a month if they want to retire at 65 with the recommended level of pension income!
Starting the savings just one year later at 31 would increase the payments to £887 a month, said the deVere Group, which did the calculations.
The alarming figures equate to half the take-home pay of Britons aged between 20 and 29, or a third of the earnings of 30-somethings, according to the most recent data from the Office for National Statistics (ONS).
It comes after the ONS revealed that the number of people paying into an occupational pension has dropped to a 60-year low. Only 35% of men and 32% of women under the age of 65 paid into a private pension during 2011/12.
“Even those who are paying in are not contributing nearly enough,” said deVere Group’s chief executive Nigel Green.
The sums are based on a person with the UK’s average salary of £26,500, retiring at 65 with a pension income of 75% of their pre-retirement earnings. It assumes no current savings, annual inflation of 3%, as well as pre-retirement investment returns of 5%, and post-retirement investment returns of a more conservative 3%.
However, the figures were said to be “over-cooked” by Tom McPhail, head of pensions research at Hargreaves Lansdown.
“A 30-year-old is unlikely to retire at 65,” he said, adding: “They don’t mention the state pension, which will deliver £7,500 a year.”
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