Forty-five percent of people are still unsure what auto-enrolment actually means. Seventy-three percent of people who know what auto-enrolment means, believe that they will be able to comfortably retire at 65 because they have auto-enrolled in their work pension scheme. More than half (56 percent) of Brits don’t know what percentage of their salary is going into a pension. With comment from Andrew Firth, Chief Executive, Wealth Wizards.
Research from digital pension advice experts Wealth Wizards has revealed that many Brits are living in a dream world when it comes to their pensions. When the concept of auto-enrolment was introduced in 2012 it seemed like a positive development – forcing employers and employees alike to make responsible pension provisions. However, upon closer examination it appears that there is a real danger that it has created a false sense of security in employees, with them believing that no further action needs to be taken. While over half of the working population claim to know what auto-enrolment is, the vast majority (73%) of this group believe that they don’t need to take any further action and believe that they will be able to comfortably retire at 65 because they are auto-enrolled in their work pension scheme.
In reality, a person aged 35, earning the national average salary of £26,500 who is auto enrolled on a standard work pension scheme would be on track for just £12,054 per year to live on in today’s money (including £8,092 a year state pension). ** Scarier still, three quarters of the group that claimed to know about auto-enrolment do not plan to think about their retirement until they retire, comfortable in the knowledge that they are auto enrolled in a work pension scheme. The other 45% of the population have stated that they are still unsure of what auto-enrolment actually means. This extreme level of misconception comes as little surprise considering that over half (54%)* of Brits stated that their company offers no pension related advice or are unsure if it is offered and over half (56%)* were unsure of what percentage of their salary goes into their pension.
Andrew Firth, Chief Executive, Wealth Wizards said: “Auto-enrolment is a good start in encouraging people to take control of their financial future and planning for retirement. However, the level of misconception uncovered by this research is concerning. In many cases those who are enrolled in a workplace pension without being aware of their options are likely to be on the minimum contribution, currently set at 2% (1% employer contribution and 1% employee contribution). So what we are effectively doing is storing up a hugely problematic issue for the future. In many cases there will be a vast discrepancy between what people believe their financial future to be post-retirement and the reality of how little they could have to live on and for how long they will have to make it last.
“Employers can address this by explaining what provisions auto-enrolment will provide in real-life terms and emphasising the importance of having a fully-informed plan in place. It isn’t enough to auto-enrol staff. Employees need help to personally connect what they’re saving into a pension with the sort of lifestyle they’re on track for in retirement. Otherwise, generations of people are likely to be met with an unpleasant surprise as they near retirement”.