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Press comment: AE report is comforting, but complacency on policy is toxic

26/02/2019

If you’re covering the Department for Work and Pensions report on the most recent cohort of employers to implement auto-enrolment and their staff please see the following comment from Ian Browne, pensions expert at Quilter.

Ian flags that while the upcoming hike may reduce wage growth, the long-term positive impact to pensions is of vital importance. Particularly, as separate figures from the Office for National Statistics today has shown income inequality in retirees is not decreasing as they are more reliant on private pensions.

Ian says:  

Ian Browne"The latest auto-enrolment report from the Department for Work and Pensions makes for comforting reading for policymakers as, among other findings, it shows that while employers are unaware that their pension contributions will jump from 3% to 5% in April, they feel either neutral or positive about it when they are made aware.  

"In fact the qualitative research reveals that only a small proportion have opted-out and the majority of those were over 50 with a rationale that they had already built up sufficient retirement provision elsewhere.

"Analysis from Quilter shows that those earning between £45k to £60k will see the smallest wage increase this tax year after the auto-enrolment rate hike, with their wages going up by just 0.6%. However, the long-term impact of the rise in contribution rates will mean that pension pots will be about 66% higher at retirement than they would’ve been if contributions stayed at 3%. The impact will be felt across the wage spectrum with those earning over £60k seeing around a 1.32% increase and those earning around £30k only taking home about 1% more than the previous year.

"However, complacency will be toxic to the policy as relying solely on the power of inertia for the continual success of auto-enrolment remains a real risk when you consider the general low level of pension contributions. Over the course of the next year the industry and government need to do more to ensure we are boosting engagement and education. As the report revealed, workers who are enrolled typically spent little time considering the idea and although they often said they wanted to save more for retirement, very few were contributing more than the minimum rate to their pension.

"We need to hammer home that foregoing yet more of their salary is not only worth it, it is necessary. Because without investing today the current generation risks poverty in later life.

"Separate figures from the ONS today show that income inequality in retired households had been growing since 2010 is now unchanged. While welcome it shows that the gap in inequality, caused in part by a shift to reliance on private pension rather than state benefits isn’t narrowing. With the state taking an ever decreasing role, the pension pot built through AE will be even more valuable."  

For more information contact

Kathleen Gallagher023 8072 629307990 004932kathleen.gallagher@quilter.com

Notes to Editors:

About Quilter plc:

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £118.4 billion in investments (as at 30 June 2019).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions; and discretionary fund management.

The business is comprised of two segments: Advice and Wealth Management and Wealth Platforms.

Advice and Wealth Management encompasses the financial advice business, Quilter Financial Planning; the discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.

Wealth Platforms includes Old Mutual Wealth UK platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

The Quilter plc businesses are being re-branded as follows: 

  • Quilter Financial Planning (previously Intrinsic)
  • Quilter Private Client Advisers (previously Old Mutual Wealth Private Client Advisers)
  • Charles Derby Group (becoming Quilter Financial Advisers)
  • Quilter Financial Adviser School
  • Quilter Cheviot
  • Quilter Investors
  • Old Mutual Wealth (becoming Quilter Wealth Solutions in 2020)
  • Old Mutual International (becoming Quilter International in 2020)

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This communication is issued by Quilter plc.  Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270.  Registered in England.