For immediate release: Tuesday 1st October 2013
“a solid start for auto enrolment but the early success is no reason for the government, regulators or pensions industry to rest on their laurels” SAYS NOW: Pensions on the anniversary of auto enrolment
Twelve months on from the very first companies automatically enrolling their employees into workplace pension schemes, it is clear solid progress has been made with a million more people now saving for retirement than a year ago. However, NOW: Pensions warns that the industry has only just overcome its first hurdle and much work remains as thousands more employers will meet their staging date between now and May 2014.
Nigel Waterson, Chair of Board of Trustees at NOW: Pensions, said: “Solid progress made thanks to lots of hard work. This would probably best sum up this initial phase in the vast auto enrolment project. With a million more people now saving for their retirement than a year ago, and opt-out rates far lower than most had predicted, there is much to applaud.”
The multi-employer trust highlights six key areas of focus for the industry:
- Capacity crunch: The industry is about to see a spike in demand that many providers may not be prepared for. Last year fewer than a hundred employers reached their staging dates between October and December. More than 3,000 will do so in the same period this year, and May 2014 will see more than 12,000 employers required to stage in a single month.
- Opt-out rates: As the economic climate remains challenging and minimum employee contributions increase from 1 to 4 per cent of band earnings in the coming years, some workers will undoubtedly feel the squeeze and opt-out.
- Communications conundrum: There is a fine line between ensuring people remain opted-in and encouraging them to increase their contribution levels. Auto-enrolment will go a long way to helping people get into the savings habit, but contributing the minimum will not, in reality, give members enough to live comfortably in retirement. Employers play a key role here in effectively and collectively communicating this message.
- Spend money to make money: Employers need to be encouraged to contribute above the minimum. Recent NOW: Pensions research* shows that only one in three (32%) UK job hunters bother to ask a company about its pensions provision when interviewing for new jobs, and a further one in three (37%) don’t even ask upon joining, either because it doesn’t occur to them (18%) or simply because they’re waiting to be told (19%). This is likely to change over the next year as auto enrolment becomes a more widely-known term, but if employers want to attract the best talent in the future, they’re going to have to start viewing workplace pensions as a selling point, rather than a regulatory burden.
- Trust doesn’t cost a thing: The lack of trust and confidence in the financial services industry is another potential barrier to the success of auto enrolment. Scheme members need to be constantly reassured that their pension is delivering value for money. If their retirement savings are being eaten up by high charges, they can quickly become disillusioned.
- Long-term role of the regulators: More work needs to be done to consolidate smaller, poor quality schemes that don’t offer value for money. It is essential that the industry, government and regulators continue to work together to safeguard the long-term success of auto-enrolment.
Mr Waterson concludes: “The early success of auto enrolment is no reason for the government, regulators or pensions industry to rest on their laurels. Pensions need to be part of the culture at work but, right now, consumers don’t trust pension providers to give them low cost, good value, honest schemes. Many challenges lie ahead and a lot of work still needs to be done to ensure that the progress made to date does not ebb away over time.”
Further detail can be found here.
– Ends –
For further information:
Tel: +44 203 640 9075
Tel: +44 207 294 3620
Notes for editors:
*Research conducted by Censuswide in September 2013 with 2,000 respondents.
NOW: Pensions www.nowpensions.com
NOW: Pensions is a multi-employer trust. The investments are managed by NOW: Pensions Investments, a subsidiary of ATP in Denmark, and the administration is carried out by Paymaster, an established UK third party administrator.
The NOW: Pension Trustee Directors, whose role is to safeguard the interests of members, comprises well-known industry figures with different areas of expertise:
- Nigel Waterson, former Shadow Pensions Minister
- Imelda Walsh, former Group HR Director of Sainsbury’s
- John Monks, member of House of Lords and former General Secretary of ETUC and TUC
- Christopher Daykin, former Government Actuary
- Win Robbins, former Head of European Fixed Income at Barclays Global Investors
NOW: Pensions is committed to developing a better workplace pension provision in the UK by offering a simple, high quality, cost efficient and systematically risk managed pension product that delivers better retirement savings for UK employees. With over 45 years’ experience providing Denmark’s working population with stable and consistent pensions returns, NOW: Pensions is set to transfer the knowledge acquired in Denmark to the UK pension market. Charges are just £1.50 per month administration charge (reduced administration charge of £0.30 – £1.00 to be applied during auto enrolment phasing for lower earners) plus a 0.3% annual product investment management charge, with no hidden charges.
In April 2013, NOW: Pensions became the first master trust to attain the NAPF’s new PQM Ready Standard. The benchmark shows employers that NOW: Pensions is a well governed pension scheme with low charges and good member communications.
The ATP Group www.atp.dk
Arbejdsmarkedets Tillaegspension (ATP) / Danish Labour Market Supplementary Pension is a statutory pension fund. It was established as an independent entity in 1964 with the objective of ensuring a greater retirement income for the Danish population. ATP has since developed to become the largest pension fund in Denmark. Together with the tax-financed basic state pension, ATP provides basic income security in old age for the Danish population.
ATP covers almost the entire Danish population representing 4.8 million members and 160,000 employers. In addition to the ATP Scheme, the ATP Group administers a number of pension and social insurance schemes, including several for the Danish state.
The ATP Group total assets under management amounted to DKK 602bn/approximately GBP 67.5bn (i.e. guaranteed benefits: DKK 516bn/GBP 57.8bn + bonus potential: DKK 85bn/GBP 9.5bn) at 30 June 2013. ATP invests in a wide variety of assets globally. Investment categories are broadly: equities, interest rates, credit, inflation and commodities.