More than 6.1 million UK employees have been automatically enrolled into a pension scheme since 2012, according to research by The Pensions Regulator (TPR).
Its Automatic-enrolment: commentary and analysis report, which covers the period from April 2015 to March 2016, also found that two-thirds (66%) of employees are active members of a pension scheme. This compares to 59% at the end of March 2015, and 47% in 2012.
The research also found:
- TPR used its formal powers 8,812 times between April 2015 and March 2016. This is 6,643 times more than in April 2014-March 2015.
- 93% of employers use a defined contribution (DC) scheme for auto-enrolment, compared to 86% in April 2014-March 2015.
- 6% of employers chose a defined benefit (DB) scheme for auto-enrolment, and 2% have opted for a hybrid.
- More than half (59%) of employers have opted for a DC trust-based scheme, and 34% chose a DC contract-based scheme.
- Among employers who opt for a DC trust scheme, 98% use a master trust. This compares to 94% last year.
- 97% of employees enrolled into a master trust are in one with master trust assurance status.
- 57% of employers yet to stage are micro employers, of which 34% have just one employee.
- The average employer contribution for staged employers is 3%.
- The average employer contribution for stakeholder pension schemes is 4%, and 5% for group personal pensions (GPP) and group self-invested personal pension schemes. This compares to an average employer contribution of 2% for both Nest and other master trusts.
Charles Counsell, executive director for automatic-enrolment at The Pensions Regulator, said: “Our key challenge in the past year has been to engage hundreds of thousands of small and micro employers and to help them prepare for automatic-enrolment.
“We needed to target these employers in new and innovative ways. The hard work and commitment of the many organisations which support employers, from trade bodies to employer representative bodies, has made a huge difference.
“The compliance rates achieved have been consistently at the top of our expectations and the savings landscape has been transformed. But we know the job is not yet done and there are still significant challenges ahead.”
Nathan Long, senior pension analyst at Hargreaves Lansdown, added: “Defined benefit pensions are largely consigned to history, with defined contribution plans the new home for millions of new pension savers. Master trusts are attracting the lion’s share of monies especially from smaller employers. This highlights the need for the new pension minister to implement tougher regulation for this type of plan as tabled in the Pensions Bill.
“Employers which use pensions to reward staff rather than simply comply with auto-enrolment seem to favour contract-based pensions like group personal pensions and group Sipps. Employer pension contributions are higher to these plans that offer greater choice, flexibility and control for savers.”