The UK’s pensions watchdog has linked the automatic enrolment (AE) system brought in seven years ago with “a huge cultural shift”, with results so far including women’s participation rates in workplace pensions rising to those of men.

According to The Pensions Regulator’s (TPR) latest annual commentary and analysis report on auto-enrolment, more people in their twenties are now saving into a workplace pension thanks to the success of the legislation requiring employers to include staff in a workplace pension scheme unless they opt out.

In the private sector, the largest increase in participation was seen among 22 to 29 year olds, with participation up from 24% in 2012 to 84% in 2018, the report showed.

The 2018 data also showed the gender gap in pensions saving had been significantly reduced since the advent of the new regime, with as many women as men now saving into a workplace pension.

Last year participation levels increased to 85% for both male and female eligible employees in the private sector, whereas before 2012 there had been a higher proportion of men in workplace pensions.

Also evident from the 2018 analysis – which TPR said would be the last annual report of this type – was an increase in saving among employees of small and micro businesses compared with before the reforms. 

Workplace saving among staff not eligible for auto-enrolment has nearly doubled, the regulator said, with 30% of these employees asking their employer to join a scheme in 2017/18 –  up from 16% in 2012/13.

Darren Ryder, director of automatic enrolment at TPR, said that when taking on a job, people now expected a pension.

“Even more encouraging,” he added, “is that there has been a rise in the number of people who, although are not eligible to be automatically enrolled, are asking to join a scheme. This signifies a huge cultural shift.”

Ryder said that to continue to build on the success so far, TPR wanted people to get to know their pension and consider whether they were saving enough for the retirement they wanted.

But more work to be done

At consultancy Barnett Waddingham, Mark Futcher, head of workplace wealth, commented on the new data, saying it was undeniable that the policy had been a spectacular success.

“The impact that auto-enrolment has had on pension savings is staggering,” he said. “Both the number of savers, and the total amount saved into pension schemes has sky-rocketed in the last seven years.”

However, the figures did not mark the end for the pension policy story, he said, adding that it was critical the government continued to build on this and educate people on the benefits of the scheme and provide the tools for more thorough engagement with savings.

But former minister of state for pensions Steve Webb — now director of policy at Royal London — said the figures showed a worrying decline in employer awareness of auto-enrolment.

The new report shows that only 82% of micro employers are aware of all five of their duties under the policy in the winter of 2019, compared with 88% in the summer of 2018.  Awareness among medium-sized employers also declined between these two points to 94% from 98%.

“Automatic enrolment has been a huge success story, but it is vital that the momentum is maintained,” Webb said. 

“The government must sustain publicity around automatic enrolment, especially targeted at employers, if the programme is to continue to be a success.”

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