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The Actuary The magazine of the Institute & Faculty of Actuaries

Less than half of UK workers aware of imminent pension hike details

Millions of UK workers will start saving more for their retirement tomorrow, but less than half of employees even know the details, a survey by Aviva has found.

Pension saving to rise ©iStock
Pension saving to rise ©iStock

The research shows that just 44% of adults aged 22 or over are aware that minimum contributions into workplace pensions will increase from 5% to 8% on 6 April.

A quarter of workers have no idea about the increase, while a similar proportion said they had heard something about the changes but didn’t know the details.

Minimum contributions will increase to 5% of qualifying earnings for employees, and 3% for employers, applying to workers aged 22 and over with annual salaries of at least £10,000.

“The increase to 8% is another step in the right direction,” Aviva’s head of savings and retirement, Alistair McQueen, said.

“For an eligible employee earning the average salary of £27,500, the increase will be less than £1 a day but they’ll see an extra £50 go into their pension pot each month.”

The survey also found that just 9% of people plan to opt out of their workplace pension scheme when the new contributions come into effect.

And separate research from Aon found that 70% of employees have stayed at maximum contribution levels when their employer has moved them to maximal levels by default.

The firm estimates that tomorrow’s changes could lead to an extra £55,000 entering an individual’s pension pot in retirement in today’s money.

This comes after the regulator revealed in February that more than 10 million people are saving into a workplace pension scheme thanks to automatic enrolment.

AON partner, Sophia Singleton, said that auto-enrolment has to be considered a success, and that the contribution hikes will move saving rates up to a “more suitable level”.

She continued: “There has been much talk that employees might opt out from this increase – that they might be scared off by the reduction in take-home pay.

“But we think that people generally accept that they should be saving more – so if we ‘do it for them’, it’s less likely that they will actively decide to reduce or cease their contributions.”

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