US - Workers covered by 401(k) plans with automatic enrolment and savings escalation would be on average 2.4-2.6 times better off than those with voluntary plans, analysis by the Employee Benefit Research Institute (EBRI) has suggested.
Jack VanDerhei, EBRI research director and co-author of the analysis said: "To the extent that 401(k) sponsors decide to switch from voluntary enrolment systems to the new automatic enrolment plan designs in the Pensions Protection Act, many workers will have increased retirement savings, especially those in the lowest-income quartile."
The research showed the benefits of automatic saving were much greater for low income workers. EBRI said a 25 year old worker on $25,000 would likely have a median increase of $92,000-$166,000 through auto enrolment
For the top 25% of high income earners, the factor of salary to pension rose from 1.8 under the voluntary system to 6.5-10.4, depending on the escalation of contributions.
The automatic provisions set out in the Pension Protection Act 2006 were designed to overcome the lack of positive action workers often took when left to make savings and investment decisions alone.
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