This October marks five years since the roll-out of auto-enrolment (AE) began, with more than eight million people now auto-enrolled into a pension, the savings are beginning to mount.
AE savers on an average income of £26,500 who contribute the minimum 2% (1% employee and 1% employer) will have a fund of £2,440, if they began saving five years ago when the roll-out of AE began, according to analysis by Aegon.
However, during the coming five years, as minimum contribution levels rise to 5% in April 2018, and then 8% in April 2019, the same individual would build up a fund of £11,430 by 2022, assuming 4.25% investment growth, highlighting how quickly pension savings can grow.
Kate Smith, Head of Pensions at Aegon, said that the findings were encouraging and that AE was improving the financial preparedness of workers. However, she warned that contribution levels need to increase significantly if people are to have enough savings to retire comfortably.
‘People in the UK are living longer, and social care costs are now are falling at the feet of more and more retirees,’ she said. ‘It’s essential that people plan for these sorts of eventualities, and as these figures show, just contributing a little bit more really pays off in the long run.’
