Savers back auto-enrolment but big gaps in pensions knowledge remain, warns The People’s Pension

With workers across the UK facing an increase in how much they pay towards their workplace pension each month1, The People’s Pension has warned that savers remain unaware of the main advantages of saving into an auto-enrolment pension.

A new survey2 by the not-for-profit pension provider, which provides workplace pensions to more than 4 million savers across the UK, found that the vast majority of pension savers in the UK (90 per cent) see the benefit of an auto-enrolment pension, but many are unaware of the contributions to their pension pot made by their employer and the government.

The survey of more than 2,000 UK pension savers found:

  • A third of people (35 per cent) are unaware that the government contributes tax relief to their pension3
  • 1 in 10 people don’t know that their employer pays into their workplace pension 4
  • Nearly half (48 per cent) of people don’t know how much their employer is paying in 5
  • The good news is that seven in 10 savers agree (79 per cent) that it’s now easier to save for retirement because the money comes straight out of their wages.

With minimum contributions increasing to eight per cent, the average earner7 could see their pension pot increase by more than £696 in the next year alone. Over the typical saving period of 45 years their pension pot would be estimated to be £97,500 higher than if paying the previous five per cent contributions. Of the £97,500 increase only £18,500 would be contributed by the member.  The remaining £79,000 is a combined result of market growth on investment, employer contributions and tax relief provided by the government.

Commenting on the survey findings, Gregg McClymont, director of policy at The People’s Pension, said:

“Auto-enrolment is a real success story with 10 million more people now saving into a pension. It’s encouraging that the vast majority of people see the positives of saving into an auto-enrolment pension, but as we head towards April’s increases, there’s work to do to ensure savers are getting the full picture.

“This year’s contribution increases should see people saving thousands more, allowing them to live more comfortably in retirement.

“There is always a risk that people may choose to stop contributing if they aren’t aware of the advantages that saving into an auto-enrolment pension brings. At a time when millions of people in the UK will be under-pensioned if they rely just on the state pension, getting this message across is crucial.”

Savers can visit The People’s Pension calculators to find out how much they’ll need to save for retirement and how long it will need to last.