There is a big difference between having to do something and wanting to do something. In a nutshell there lies the difference between auto- enrolment and pension engagement.
Understanding the value of a pension and the fundamental role it can play in supporting a desired lifestyle in retirement is a great place to start. Knowing how to review income and spending to create the room to save into a pension from an early age is also essential. And then the final piece is in establishing an ongoing relationship with a pension so that individuals regularly check it, model its projected value at retirement, see if they can save more and review their investments. Together these steps equal pension engagement.
Financial education provides the path to enlightenment and engagement. It helps everyone from early career to those at retirement to really understand and value their pension and ensures they make good, informed decisions to maximise its potential.
Firstly, is AE working? Well from a pure numbers game, yes. Since 2012 some 5.5 million workers have been auto-enrolled into qualifying pension schemes with over 59,000 employers declaring their compliance. By 2018 a further 4 million workers are expected to be enrolled, meaning that more people than ever before saving into a pension – fantastic news.So, saving problem solved? Well not exactly. According to a recent Office for National Statistics survey the average amount paid into defined contribution (DC) workplace pension schemes fell from 9.1% in 2013 to 4.7% in 2014 – a reduction just shy of 50%. The root cause of this is undoubtedly the watering down of scheme quality by those auto-enrolling at the legislative minimums.