Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
Quick links:
  • Home
  • The Actuary Issues
  • May 2014
05

Auto-enrolment 'good for older workers', says PPI

Open-access content 20th May 2014

Pensions experts have urged older workers not to opt out of their workplace auto-enrolment schemes

2

A Pensions Policy Institute study found that over 95% of workers aged between 50 and state pension age are likely to receive good value from their workplace schemes. Its report said that the recent pension policy changes, including the phased introduction of minimum contributions for auto-enrolment and the introduction of the single-tier state pension in April 2016, would boost retirement incomes for this age group.

Its The benefits of automatic enrolment and workplace pensions for older workers report, published yesterday and funded by insurer Prudential, took data from the English Longitudinal Study of Ageing, which began in 2010. Data was used to calculate likely rates of return from pension contributions under auto-enrolment, based on household circumstances.

While staying opted in a workplace scheme was the best option for the vast majority of people, those who were struggling and not able to afford their pension contributions should opt out, the PPI said.

Opt-out rates for those aged 50 are around 15%, compared with an average opt-out rate of 9%, according to the Department for Works and Pensions. 

Mel Duffield, deputy director of PPI, said: 'The analysis shows that, despite the higher opt-out rates of around 15% seen amongst older workers, staying in a workplace pension is likely to deliver a very good return on their own pension contributions for the vast majority of this group.

'Even so, the pension pots being built up by older workers under automatic enrolment, and particularly by lower earners, are expected to be relatively small. 

'An average 51-year-old who is eligible to be automatically enrolled in 2012 and who only makes the minimum level of contributions, will have built up a pension pot of around £13,000 by the time they reach state pension age.'

But, even those groups with low rates of return, they would still be able to benefit from being able to take a 25% tax-free lump sum at retirement and the remainder of their pension pot would likely be small enough to be taken as a lump sum. 

Duffield continued: 'Following the announcement in the Budget 2014, from April 2015 all older workers should be able to use these flexibilities, irrespective of the size of their pension savings. 

'Individuals will, however, require support and guidance to ensure that they can access their pension in a way that delivers a good return on saving while meeting their income needs at different stages during their retirement.'

A Prudential spokeswoman told The Actuary: 'Auto-enrolment has the potential to improve all retirees' longer-term prospects, even those closer to stopping work. 

'While the perfect preparation is to save as much as possible as early as possible when working, it is also important for older workers to know it's never too late to save for their retirement. As the report shows, even making the minimum level of contributions will help them build up their pension pot, with the financial benefit that some of it may even be taken as a tax-free lump sum.'

This article appeared in our May 2014 issue of The Actuary.
Click here to view this issue
Filed in:
05
Topics:
Pensions
Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Make the switch from Pensions > Life Insurance

Manchester
Excellent Salary + Bonus (study support if required)
Reference
118732

Nearly/Newly Qualified Actuary – With Profits Reporting & Valuation

Scotland
£Upon Application
Reference
118763

Director of Investment Risk

London (Central)
+ comprehensive benefits
Reference
118783
See all jobs »
 
 

Most-Popular

 
 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2020 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited, Level 5, 78 Chamber Street, London, E1 8BL. Tel: 020 7880 6200