The amount the average worker waiting to be put into a workplace
pension scheme is prepared to save for their retirement has fallen by a
quarter over the last year, according to a new survey published weeks
before the first anniversary of the government's automatic enrolment
regime.
Scottish Widows, which issued the data, said the "alarming" fall in the amount employees were willing to contribute to a company pension showed many were still "removed from the reality of retirement".
The survey coincided with a call by the Association of British Insurers to make the multibillion-pound system of pension tax relief "fairer", simpler and easier for people to understand in what is likely to be viewed as a change in approach for the industry body; up until now the ABI has talked about "protecting" pension tax relief, where every pound someone pays into a private pension scheme is matched with tax relief by the government.
Under automatic enrolment, which began in October 2012, backed by adverts featuring well-known businesspeople such as Karren Brady and Theo Paphitis, millions of employees are being put directly into a workplace pension scheme. Both the worker and their employer pay into the scheme, and ministers called it "the biggest shake-up in UK pensions for over 100 years".
The system is being phased in over several years, starting with the largest employers, and the aim is to get up to 11 million more people saving in a workplace pension. Well over one million workers have so far been auto-enrolled. But Scottish Widows said its study of more than 5,000 people showed that among those still to be enrolled, the amount they were willing to save each month had fallen on last year's levels in every salary bracket except for those earning more than £50,000 a year. This amounted to an average drop from £67 a month in 2012 to £51 this year.
For those earning around £10,000 a year, the average monthly amount they would be prepared to contribute plunged from £39 to £16. By contrast, those on £50,000-plus said they would now be willing to pay in £188, compared with £165 in 2012.
Tom McPhail, head of pensions research at investment firm Hargreaves Lansdown, said the research "highlights the reality that we're still a long way from mission accomplished". However, pensions minister Steve Webb defended the new system, saying: "We are helping people to plan for their retirement through automatic enrolment, and despite the difficult economic times, take-up has radically outstripped expectations. In less than a year we have seen 1.4 million people join a workplace pension scheme."
The ABI's call for simplification of pension tax relief was intended to start a debate, Otto Thoresen, the director general of the industry body told the Guardian. He said that the ABI believed the system "could work better" and that it wanted to start a debate about how it could be improved, with the aim of encouraging people - particularly those on lower and middle incomes - to save more.
Thoresen said: "We think the system needs to be fairer, and needs to be simpler and easier for people to understand. It needs to be straightforward to implement."
His comments come weeks after the TUC said that while tax relief was an important way to encourage pension saving, "the benefits are currently far too skewed towards the very wealthy". Speaking in July, TUC general secretary Frances O'Grady added that it "cannot be right" that basic-rate taxpayers made the majority of all pension contributions but received less than a third of the total tax relief budget. The TUC backs a proposal to set a flat rate of tax relief at 30% which, it said, would transfer some of the benefits from the very wealthy to lower and middle income earners without any additional cost to the Exchequer.
Scottish Widows, which issued the data, said the "alarming" fall in the amount employees were willing to contribute to a company pension showed many were still "removed from the reality of retirement".
The survey coincided with a call by the Association of British Insurers to make the multibillion-pound system of pension tax relief "fairer", simpler and easier for people to understand in what is likely to be viewed as a change in approach for the industry body; up until now the ABI has talked about "protecting" pension tax relief, where every pound someone pays into a private pension scheme is matched with tax relief by the government.
Under automatic enrolment, which began in October 2012, backed by adverts featuring well-known businesspeople such as Karren Brady and Theo Paphitis, millions of employees are being put directly into a workplace pension scheme. Both the worker and their employer pay into the scheme, and ministers called it "the biggest shake-up in UK pensions for over 100 years".
The system is being phased in over several years, starting with the largest employers, and the aim is to get up to 11 million more people saving in a workplace pension. Well over one million workers have so far been auto-enrolled. But Scottish Widows said its study of more than 5,000 people showed that among those still to be enrolled, the amount they were willing to save each month had fallen on last year's levels in every salary bracket except for those earning more than £50,000 a year. This amounted to an average drop from £67 a month in 2012 to £51 this year.
For those earning around £10,000 a year, the average monthly amount they would be prepared to contribute plunged from £39 to £16. By contrast, those on £50,000-plus said they would now be willing to pay in £188, compared with £165 in 2012.
Tom McPhail, head of pensions research at investment firm Hargreaves Lansdown, said the research "highlights the reality that we're still a long way from mission accomplished". However, pensions minister Steve Webb defended the new system, saying: "We are helping people to plan for their retirement through automatic enrolment, and despite the difficult economic times, take-up has radically outstripped expectations. In less than a year we have seen 1.4 million people join a workplace pension scheme."
The ABI's call for simplification of pension tax relief was intended to start a debate, Otto Thoresen, the director general of the industry body told the Guardian. He said that the ABI believed the system "could work better" and that it wanted to start a debate about how it could be improved, with the aim of encouraging people - particularly those on lower and middle incomes - to save more.
Thoresen said: "We think the system needs to be fairer, and needs to be simpler and easier for people to understand. It needs to be straightforward to implement."
His comments come weeks after the TUC said that while tax relief was an important way to encourage pension saving, "the benefits are currently far too skewed towards the very wealthy". Speaking in July, TUC general secretary Frances O'Grady added that it "cannot be right" that basic-rate taxpayers made the majority of all pension contributions but received less than a third of the total tax relief budget. The TUC backs a proposal to set a flat rate of tax relief at 30% which, it said, would transfer some of the benefits from the very wealthy to lower and middle income earners without any additional cost to the Exchequer.
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