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Auto enrolment: Educate to accumulate

12th Dec 2013
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The government has made a number of announcements this year, most recently on the need to ‘cap’ pension scheme charges and introduce greater transparency in the sector, says Michael Whitfield, chief executive at Thomsons Online Benefits.

Both measures intended to improve pension outcomes for members. Noble as these may appear, they focus on one aspect (finance) and fail to solve, or even address, the crux of the issue – actually getting employees to take responsibility for their income in later life, commonly referred to as employee engagement. Having a disengaged majority, comfortable with auto enrolment, and ‘vanilla’ pension schemes is simply not a viable option for the Great British apathetic pension investor. If sustained, this apathy will produce a nation of ineffective savers, poorly provided for in their later years.

Numerous surveys are already revealing popular regret at not having saved more for later life. A recent report conducted by Friends Life suggests that more than half of workers in the 40-plus age bracket wish they had put more money aside for their retirement earlier in their working years, as many now find themselves facing inadequate savings to retire on. We have to question how we have reached this juncture, and what effective measures can now be taken to prevent future generations reaching the same situation.  

While last week’s Autumn Statement announcements around a state pension boost for the over 60s, and the increase in retirement age are sensible steps, they occupy a very small area of a very big black pensions hole and go little of the way towards solving the pensions crisis. With the number of centurions increasing five-fold over the last 30 years it was inevitable that the government would have to raise the retirement age. However, this isn’t bad news – many people who are over 65 enjoy working, and there are clear mental and physical health benefits to working longer. In future, what we’re likely to see is a hybrid between work and retirement which will help alleviate the pensions gap. However, more action is needed now with Britain’s savers taking greater personal responsibility for their own pensions provision. 

Auto enrolment and the pensions cap

Auto enrolment is a step in the right direction to help people save earlier for their retirement but at the 1-3% contribution levels, it will not provide a comfortable retirement income. In the last few weeks the DWP’s consultation on pensions charging has concluded, paying particular attention to auto enrolment schemes. With a raft of charging ambiguities dogging the sector, it’s right to act now ahead of the looming auto enrolment tsunami facing smaller businesses. There’s no escaping the fact that the 30,000 companies with staging dates in the four months after April 2014 add a serious sense of urgency to overcoming the complexities and capacity issues that clearly exist within the sector.

Behavioural change

While advocating greater disclosure should be applauded, transparency on its own will not drive behavioural change. Simply providing more information will not compel people to take notice of it, and act on it. Rather, the key to successful pension reform lies in relentless pension education and encouragement – for both employees and employers alike.

Indeed, recent LSE research commissioned by Thomsons found that a clear and recurring strategy of communication and open dialogue significantly increased employees’ engagement level with their workplace pension. Those that experienced comprehensive communication of their pension scheme’s benefits, were 20% more likely to pay at least 4% of their salary into the company pension scheme. It also found that those employees benefitting from improved communications, as part of a total reward model, were more aware of their need to improve their own knowledge of the complexities of pensions.

The government is acting – but present activity alone will likely fall short and fail to carry the necessary impact. With the correct approach, we have the potential to dramatically change this country’s attitude towards pensions from apathy to ownership and ensure that workers are better provided for in their later lives. However, to capitalise on this, communication channels must remain open for ongoing pension reform and employers, and employees, must take a proactive stance in pensions planning.

Employers have a requirement to drive transparency by establishing due diligence of their group scheme – is it performing adequately and is it still relevant for the demographics of your organisation?

Equally employees must take greater personal responsibility for an issue that will dictate their lifestyle for years to come.

Michael Whitfield is the chief executive of Thomsons Online Benefits.

Replies (6)

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By gerrysims
13th Dec 2013 11:06

Pensions Regulator online

I tried to add the auto-enrolment service to my agent's online account. They couldn't do it because I am based in France with a French postcode despite the fact I advise a number of UK employers. They were not interested in providing a solution so have effectively placed an obstacle between me and my clients. A poor state of affairs and very amateurish.

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By moneymanager
13th Dec 2013 12:51

Battle weary?

Unlike the British army it would appear that the Roman version is going from strength to strength. The only question is when will they retire; when they are centenarians or somewhat earlier?

In passing, those long serving centurions must be made aware that where they have sought protection from an LTA charge and stopped contributions that auto-enrollment most certainly does affect them and will do so every three years. I think it disgraceful that there is no 'repair' mechanism in place for anyone who fails to continue to opt out of this government strong arming tactic.


For those who have found it difficult ot save while on active duty and are now small or late savers hoping to take the lot i.e. sub £18k as cash under the Trivial Commutation rules could also find themselves auto'd in and locked into taking just the standard 25% as cash and a piddly pension with the rest.

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By moneymanager
13th Dec 2013 17:20

Stand Easy

I have just spotted an announcement of two days ago of great benefit to those withearlier protection and affected by auto-enrolment: see '

'Pension concession for higher earners'

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By chatman
16th Dec 2013 10:05

National Insurance

Why doesn't the government deduct money from people's income and invest it for their pensions? That way, no profits would leak out to the corrupt private sector. They could call it "National Insurance" and "State Pension".

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By Wiganer Elaine
16th Dec 2013 14:22


I'm not sure if this is still the case, but I remember reading this a few years ago and thinking that the Singaporean method was a good idea and could be adapted in the UK.

Basically, every person had their own "government account" . A set percentage of their annual income was paid into this account as a minimum contribution; you could draw down from this account for a set number of things, one of which was an income after retirement. The best part of this was that whatever monies were left in an individual's "account" when they died were passed onto family members as part of their own "account".

Each year everyone received a statement detailing the value to date of their account!

If this can be done in Singapore, surely something of this nature could be done here in the UK?

The costs of auto-enrolment for small business employers will end up driving many of them to the wall. It shouldn't be yet another tax that businesses have to pay to employ someone!

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By PK Group
16th Dec 2013 15:42

Quote: "There’s no escaping

Quote: "There’s no escaping the fact that the 30,000 companies with staging dates in the four months after April 2014 add a serious sense of urgency to overcoming the complexities and capacity issues that clearly exist within the sector."

This highlights the need to get everything sorted very early. We say to start thinking about your Automatic Enrolment responsibilities as far as 6 months before your staging date, just so you don't get caught out.

Also, it will certainly be interesting to see the value of the 'average' pension for opt-ins and opt-outs of the scheme.

PK Group

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