So by April 2019 we will arrive at ‘steady state’ for minimum contributions with workplace pensions having stepped up to at least 8 per cent. This is seven years later than was initially planned for during the early formation of the AE regime.
But we are almost there and although, for many, this rate of saving will not help them reach an adequate replacement income in retirement it is an important step forward.
The success, or otherwise, of these step ups will inform what happens next with contribution rates. The AE Review stopped short of any formal recommendations on contributions while there is uncertainty about how step ups beds in.
What is certain, however, is the central role that employers have played and will continue to play in helping automatic enrolment work harder for employees who must save for their future.
From the conversations I’ve had with both employers and employees, the education and guidance wrapped around a well-governed, rewarding workplace pension is paramount to success.
Alex McCallum is retirement expert at Scottish Widows
