‘Despite the uncertainty facing millions of savers in 2020/21 the majority have stuck with their workplace pension,’ says analyst
The number of people saving in a workplace pension scheme remained steady during lockdowns, new data has revealed.
There was only a small drop-off in the proportion of workers opting out of their workplace scheme every month.
The figure fell from 0.75% in 2019/20 to 0.63% the following year.
The rates of contribution also held steady, as the majority of employees contributed at least 4.5% of their earnings to their retirement.
On the other hand, many of those most affected by the pandemic, for example the self-employed, are not eligible for automatic enrolment.
Automatic enrolment was introduced in 2012 to help address the decline in private pension saving and to make long-term saving the norm.
There were concerns that the economic downturn caused by the coronavirus pandemic would be harmful to people’s retirement plans.
“Despite the uncertainty facing millions of savers in 2020/21 the majority have stuck with their workplace pension, benefitting from both upfront tax relief and matched employer contributions in the process,” said Tom Selby, head of retirement policy at AJ Bell.
“Although overall many are still saving too little to enjoy a comfortable retirement, the fact automatic enrolment held firm during the most turbulent 12-month period in living memory is hugely encouraging.”
However, there could be further challenges to come according to Selby.
“The UK economy has been held together by hundreds of billions of pounds of state support, primarily provided through the furlough scheme. As this support is withdrawn, policymakers will need to keep an eagle eye on both the unemployment rate and any knock-on impacts on retirement saving.”
Additionally, millions of people, including the low paid and self-employed, who are not part of auto-enrolment, with many saving little or nothing for their financial future.
“Ensuring as many people as possible understand the importance of saving both for the short and long-term – and the potential consequences of failing to do so – must be an absolute priority for Government, regulators and the wider pensions industry.”
