Workers given second stab at pension 'free money'

Updated
Second chance at auto-enrolment
Second chance at auto-enrolment



Workers who walked away from an estimated £200 million of "free money" by choosing not to save into a workplace pension will start to get a second chance to take part in the landmark automatic enrolment scheme from tomorrow onwards.

October 1 marks three years since the introduction of automatic enrolment into workplace pensions. So far, more than five million people have been enrolled - while around half a million workers decided to opt out of the scheme.

These half a million people will now start to be offered a second chance to take part in workplace pension saving - because employees must re-enrol workers who opted out and would still qualify to take part every three years.

Pension scheme Nest calculates that by opting out the first time around, the half a million workers collectively missed out on around £350 million being put into their pension pots.

This estimated £350 million figure includes around £205 million which would have been paid into workers' pension pots for them - had they stayed in their pension scheme - through employer contributions and tax relief.

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Employees taking part in the scheme also need to make contributions to their pension pot themselves from their wages.

Workers are eligible if they are at least 22 years old and under state pension age, earning over £10,000 a year and work, or usually work, in the UK.

Nest's estimates are based on workers making the minimum contributions necessary to take part in automatic enrolment, and on the average salaries of those who qualify to take part.

It calculates that, for example, someone who joined up in the first year the scheme was launched and paid in the minimum amount necessary to take part would have £1,141 on average in their pot by now, made up of their own contributions, those of their employer as well as tax relief and returns on their investment.

Someone who started saving into a workplace pension two years ago would have around £670 in their pot by now, while someone who was enrolled in 2014/15 would have around £218 sitting in their pot to get themselves started.

Helen Dean, CEO of Nest, said: "For those who didn't stay in their pension scheme the first time around, re-enrolment gives them a second chance to benefit from employer contributions and tax relief.

"We know support is rising for auto enrolment. This is the time for those who opted out, stopped saving, or who are just about to be enrolled for the first time, to ask themselves: do I really want to walk away from this money?"

Automatic enrolment was set up to head off fears of a looming retirement savings crisis, with people living for longer but not putting enough money away for their old age.

Nest was set up as part of the workplace pension reforms as a high-quality pension scheme to help all employers meet their automatic enrolment duties.

So far, auto-enrolment has been seen as a success, with more people choosing to stay in their pension scheme after being automatically placed in it than expected. Workers can only choose to opt out after being placed into a workplace pension scheme, not beforehand.

Nest's research has also found that in 2014, 41% of workers who had previously opted out now plan to stay enrolled, up from 19% in 2013.

Minister for Pensions Baroness Altmann said: "More and more people recognise the rewards that can be reaped from saving into a pension in terms of providing financial security when they come to retire.

"Just 10% of eligible workers are choosing to opt out of automatic enrolment. And with the number of people saving into a workplace pension at a 10-year high, our message that people should start saving for their later life as soon as they can is being heard loud and clear."



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