Workplace Pension Auto-Enrolment: What does the future hold?
Almost 20 million people have been auto-enrolled on to workplace pensions since the scheme was introduced a decade ago. Just under 90% of all eligible employees.
The case can be made that many of these individuals would not otherwise have had long-term retirement savings to go along with their state pension to help with their finances as they reach old age.
Some, however, have criticised the scheme for reasons which included the decisions around opting-out and the pressure this saving would put on the lowest paid employees who already struggled week to week without a further impact on their take-home pay.
There was also opposition from private pension companies as they felt that this scheme introduced a kind of state-sponsored opposition to their products.
The scheme has remained in constant review and changes such as increasing contributions from savers and employers as well as suggestions on the age of eligibility and earnings thresholds are proposed regularly.
In 2017 the government hoped to change the eligible age for auto-enrolment from 22 to 18 and target a removal of the lower earnings limit to take effect in the mid-2020s but there is concern that these changes may not be implemented until around 2030, despite a private members bill in the house of commons asking that these changes be made sooner.
Additional concern around affordability comes in the form of the cost of living crisis we are currently seeing the emergence of. Workers may be forced to make higher contributions into their pensions as well as student loans if proposed changes come into force. Adding this to the increased cost of household energy bills, vehicle fuel and council tax paints a grim picture for the affordability of saving for the lowest earners as well as those just outside of the lowest paid band of employees: the individuals with the most difficult decisions to make around their pension contributions in the immediate future are perhaps those who will need the savings later in life the most.
There is a possibility that the government are looking into such solutions as opening up access to higher risk or less liquid investments in the hopes or improving the return for pension savers. But the value of this will be difficult to assess for savers on an individual level.
While there has been a constant increase in uptake of the workplace pension scheme since its inception, it could be the case that, as new policies emerge over the coming months and years, we may begin to see a drop off in workplace pension savers for the first time as those on lower incomes opt-out due to the effect of saving on their current financial situation.