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Pensions Policy Institute (PPI) found
it has doubled the participation of 22-
to 29-year olds in pension schemes.
A 22-year-old median earning man
in 2017 could build a pension fund
of £108,000 under auto-enrolment
minimum contributions.
Last year, the DWP reviewed the
first five years of auto-enrolment, and
made a few recommendations for its
future. These included expanding
eligibility to 18 year olds, from the
current age of 22, and removing the
£6,032 floor under earnings before
auto-enrolment kicks in so people save
from the first pound earned. These
changes could see an average 22-year-
old’s pension pot swell to £146,000.
Chris Curry, director at the PPI, says
that auto-enrolment has been more
MANAGING YOUR WORKPLACE PENSION
If you have been auto-
enrolled into NEST (National
Employment Savings Trust)
through your workplace,
you should make sure the
investment selection you
have been given is suitable
for your needs. NEST
automatically puts savers into
its Pensions Retirement Date
fund, which matches your
state pension age, but this
has been criticised for being
too conservative with risk for
younger investors who have
time to ride out the ups and
downs in the market.
You should look at how
you are invested and
FE TRUSTNET
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consider one of NEST’s other
options such as the more
adventurous Higher Risk
fund for a better risk/reward
balance in the long term.
It also has an Ethical fund,
a Sharia fund, or a Lower
Growth fund if you want to be
more cautious.
You are also free to
increase your contributions
to NEST from the minimum
level if you can afford to, and
this is usually a wise move as
the power of compounding
interest means the more
you can save earlier on,
the more dramatically your
money will grow.
With NEST, you benefit from
free contributions from your
employer, so it’s probably
a good idea to stay in the
scheme to take advantage of
this. But if you’d also like to
save elsewhere, you can pay
into other pension products
too, such as the Lifetime ISA
or a Self Invested Personal
Pension (SIPP). With the
regular savings habit auto-
enrolment cultivates, you
could increase the value of
your retirement fund however
you wish, using different
investment strategies
to spread your risk and
maximise long-term returns.
successful than expected. “One reason
is the number of people now pension
saving, and opt-out is part of that.
There were fears that between a quarter
to a third of people put in a pension
scheme would come out again, but
we haven’t seen that happen. Inertia
is quite powerful – once they are in,
people tend to stay in.”
He also says concerns that small and
micro employers would not be able
to cope with auto-enrolment have
proved unfounded. As of February
this year, one million companies have
come on stream and every employer
is now covered under the scheme.
Hargreaves Lansdown’s Tom
McPhail agrees the system has worked
surprisingly well. “It has been a
success in terms of where we thought
the scheme would be at this point.
NEST [the government’s workplace
pension scheme] has done its job,
employers have complied, there are
very low rates of opt-out, so a lot of
boxes have been ticked,” he says.
Self-employed workers remain a
bit of a blind spot, however – NOW:
Pensions estimates 1.3 million people
could be missing out on £182m of
Concerns that small and
micro employers would not
be able to cope with auto-
enrolment have proved
unfounded
employer pension contributions each
year. DWP figures show only one in
seven self-employed people saved into
a pension in 2016. The Lifetime ISA has
failed to bridge the gap because over
40s are not eligible and this age group
is more likely to be self-employed.
One of the DWP’s recommendations
set out in December 2017 was to pilot
an expansion of the scheme to self-
employed people. This could go some
way to making sure the auto-enrolment
system works effectively for everyone.
Another issue that could arise
in future is that employers may
offset the rising cost of pension
contributions by squeezing wages,
putting the burden of pension
provision back on to workers. DWP
research suggests 10 per cent of
employers have so far halted pay rises
to absorb automatic enrolment costs.
“There will probably be a
rearrangement of remuneration
packages,” says Curry. “It may not
be explicit, but employers will have
to find the money from somewhere,
whether that’s higher prices, lower
profits, or changes in wages. It is
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