Will auto enrollment in Pension Planning work?

In a word no, if employers and governments follow the British example as shown in this story written by Rajan Chagge published last May .

According to new research, the vast majority of workers in the UK have no idea about auto-enrolment. The shocking findings uncover the fact that many people in Britain are not interested in saving into any form of pension.

One boost to those who are not currently saving is that everyone working in the private sector will be saving for their retirement through their employer, and they will do so automatically. If they do not want to save for a pension, then they will keep the right to opt out at any time they choose.

Government’s solution

The scheme, which will come into force from October this year, is the Government’s solution to the falling number of people who are saving into a company pension and protecting their retirement years.

Pension saving has been on a downward spiral for several years. This is an issue that has had the Government concerned, particularly because people then retire and become fully dependent on the state pension, which is an income that often cannot maintain a worker’s standard of living during retirement.

The state pension is a useful income, and together with another pension income can provide a nice addition and boost to the finances people have in their golden years.

The research was carried out by Aviva, who found that 68% of workers have very little information about auto-enrolment and what it entails for them. The insurer then said that the Government needs to work overtime if they are to encourage these workers to take advantage of the scheme.

In the event that auto-enrolment does fail, it will be a big slap in the face for the Government, who have invested a great of time and resources in developing it.

Warning by insurer

In the Working Lives report by Aviva 2,004 private sector workers and 210 employers were polled, from which a worrying piece of information was found. Using the research as a base, the insurer has warned that the number of employees who could opt out from auto-enrolment schemes could be a major hurdle in the scheme being a success.

Firms have predicted that they are expecting a third of their workforce to opt out, while 37% who are still uncertain have said that it is likely that they may leave the scheme. There are 43% who will give encouragement to the Government, after revealing that once enrolled they will be remaining in the scheme, and a further 8% have said that they would be willing to contribute more.