The majority of employers who have successfully introduced auto-enrolment (AE) are only contributing the minimum legal amounts, according to Department for Work and Pensions (DWP) research.
The Employers' Pension Provision survey 2015 conducted by IFF Research on behalf of DWP found that three in five (62%) of staged employers were only contributing the minimum 1% of qualifying earnings. One third of staged employers were contributing at least 3% from the start. This is leading to fears that workers will have to retire a lot later than expected in the future.
The report surveyed 3,008 UK private sector employers that employed a total of 1.8 million workers between May and September 2015.
Royal London director of policy Steve Webb (pictured) said the findings were worrying: "While it is great that membership of schemes is shooting up, it remains the case that for many workers, only tiny amounts of money are going in, and this is before we get to the smallest firms who seem most likely to contribute at minimum levels.
"Unless we can get workplace pension contributions up quickly to a more realistic level, we risk facing a generation of workers who simply cannot afford to retire".
The report also found that 40% of employers setting up a new scheme chose to use National Employment Savings Trust (NEST). Some 9% of workers had opted out of AE during the one-month opt out period. Those who had enrolled into NEST and single employer occupational schemes were slightly more likely to opt out than those enrolled into stakeholder schemes or group personal pensions.
The total median cost of implementing AE for employers was £1,000, and costs tended to increase with employer size. However the report found that those who paid for advice did not have any implementation costs, meaning the only cost of AE was found to be financial advice.
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