October 24, 2019 1:53:20 PM
The proportion of workers aged in their 20s who are saving into a workplace pension has surged since 2012, figures from a regulator show.
The Pensions Regulator (TPR) looked at the impact of automatic enrolment since its introduction in 2012, said the largest increases in participation has been seen among eligible employees in the youngest age groups.
In the private sector, the proportion of 22 to 29-year-olds taking part in workplace pension saving has jumped from 24% in 2012 to 84% in 2018.
Its figures also indicate that progress is being made towards closing the pensions gender gap.
In 2018, participation levels increased to 85% for both male and female eligible employees in the private sector.
Before 2012, participation rates were higher for male employees than for women.
Guy Opperman, Minister for Pensions and Financial Inclusion, said: “It’s great to see a whole new generation of workers in big and small businesses putting money away and planning for a more secure future.”
Director of automatic enrolment at TPR Darren Ryder said: “When taking on a job, people now expect a pension.”
Tom McPhail, head of policy at Hargreaves Lansdown, said: “Auto-enrolment is rightly hailed as a great policy success.”
But he said: “More effort also needs to be made to ensure that everyone benefits from tax relief on their retirement saving, rather than the present system which often penalises the lower earners who need it most but miss out because of the way their employer has chosen to run their pension.”
Ian Browne, a pensions expert at Quilter, said: “The job is not done. How many of those enrolled have looked to see if the default fund is appropriate?
“Are they aware that by itself minimum contribution saved through (automatic enrolment) are unlikely to give them enough for a comfortable retirement?”
Tom Selby, senior analyst at AJ Bell, said: “A 25-year-old who earns £30,000 a year paying in the minimum might end up with a fund at worth around £200,000 in today’s terms by age 65.
“That would buy an annual inflation-protected annuity worth about £5,500, or a total income of £14,000 when combined with the state pension.
“Anyone with ambitions above this level needs to take responsibility and look to save over and above the auto-enrolment minimum.”