Automatic enrolment evaluation report 2018
09 January 2019
The 2018 automatic enrolment evaluation report brings together the latest evidence and new analysis to show what has happened to workplace pension membership and contributions since automatic enrolment began.
Automatic enrolment aims to increase workplace pension saving in the UK. It forms part of a wider set of pension reforms to help people to save towards achieving the lifestyle they aspire to in retirement.
The Automatic enrolment evaluation report 2018 follows the 2017 analytical report, which included the 2017 evaluation of automatic enrolment. Findings from this latest report will be used to inform the evaluation of the workplace pension reforms and ongoing development of automatic enrolment policy.
The Department for Work and Pensions (DWP) is committed to fully evaluating the effects of the workplace pension reforms, and as such has produced evaluation reports annually since 2013, following a baseline report in 2012 which described the landscape before the implementation of automatic enrolment.
This latest evaluation report brings together the latest evidence, including evidence published within the last 12 months and new analysis conducted for the report, showing what has happened since automatic enrolment began.
Existing evidence from the last 12 months shows that since the start of automatic enrolment in 2012, more than 9.9 million workers have been automatically enrolled, and over 1.4 million employers have met their duties, with 591,000 workers having been automatically re-enrolled and 73,643 employers having met their re-enrolment duties.
The number of compliance notices issued by The Pensions Regulator (TPR) has risen from nearly 34,000 in 2016/17 to nearly 61,000 in 2017/18, however this is broadly in line with the increased number of employer declarations of compliance TPR received. The majority of employers subsequently complied when they were reminded of their duties.
Levels of awareness and understanding of automatic enrolment are high. In particular, at least 93 per cent of micro, small and medium-sized employers were aware of each individual ongoing duty in relation to automatic enrolment. Virtually all medium and large employers (97 per cent and 99 per cent respectively), and the vast majority of small employers (84 per cent), stated that they had automatically enrolled employees into a qualifying pension scheme by late 2017.
In 2017, just under one half (47 per cent) of employers currently had some form of workplace pension provision, up from 19 per cent in 2013. These organisations employed 91 per cent of all private sector employees. Some employers were contributing more than the minimum required contribution rate. In around one quarter (24 per cent) of schemes used for automatic enrolment, employers were contributing at least three per cent in 2017, ahead of the first planned increase.
Data collected up to 2017 found that the number of eligible employees participating in a workplace pension has increased to 17.7 million (84 per cent), up from 10.7 million (55 per cent) in 2012. Overall, eligible employees are continuing to save persistently.
The annual total amount saved by eligible employees across both sectors stands at £90.3 billion in 2017, which is an increase of £4.3 billion from 2016. Annual total amounts increased in both public and private sectors from 2016. The public sector increased by around £0.3 billion and the private sector by £4.0 billion.
Findings from the DWP’s communications tracking research (June 2018 wave) found that the majority of individuals interviewed viewed automatic enrolment as a good thing for them personally (82 per cent); agreed saving into a workplace pension was normal for them (80 per cent); and knew where to go if they wanted to find more about workplace pensions (83 per cent).
New analysis within this report
The emerging findings from forthcoming DWP research with ‘newborn’ (new) employers, to be published in 2019, suggest that the reality of implementing automatic enrolment was usually less burdensome than employers had anticipated. The financial burden, over and above the ongoing cost of employer contributions, was either small or even non-existent.
Rates of opt-out and cessation (stopping saving into a pension after the opt-out period) have at the end June 2018 remained consistent with levels before the first planned contribution increase in April 2018.
Those who are enrolled due to staging have higher opt-out rates than those enrolled due to starting a job with an employer who already has ongoing automatic enrolment duties.
Males and females have the same levels of opt-out, but males have slightly higher levels of cessation. Generally, older age groups have higher opt-out rates, but those aged 22 to 29 and 60 to State Pension age have the highest cessation rates – although these rates are at relatively low levels.
Higher earners tend to have higher opt-out rates than lower earners, while (with the exception of the highest earners who have the highest cessation rates) there is not much variation in cessation rates by earnings level.
In 2017, over 7 million eligible private sector employees saving into a workplace pension received an employer contribution of two per cent or above (above the then minimum contribution rate); of these, 5.5 million received an employer contribution of four per cent or above. More than 92 per cent of eligible employees in the private sector contributing between three and four per cent received a matching (or higher) employer contribution rate.
Approximately 5.9 million eligible employees were already meeting the April 2019 minimum contribution rates, based on data from April 2017. However, around 5.1 million eligible employees were still contributing below April 2018 minimums at that time, and around 6.1 million will have to increase their contributions by April 2019, if not earlier.
The rate of levelling down (reducing the generosity of contributions or outcomes for existing pension scheme members) has increased slightly since 2012. However, findings from the Employers' Pension Provision Survey 2017 suggest that where employers have experienced increased contribution costs as a result of automatic enrolment, only one per cent of employers have adopted levelling down as a strategy to absorb increased contribution costs.
The latest evidence shows that automatic enrolment remains on track, with millions more employees enrolled into private pension saving in the UK. The staging of employers has completed, and evidence to date from the first contribution increase suggests consistent saving behaviours from prior to the increase.
The next evaluation report will set out further evidence from the first contribution increase and findings from the second increase in April 2019. Following the completion of the second increase, automatic enrolment will move from implementation of the reforms to steady state.
The next evaluation report will review progress to date since implementation started in 2012, and update on future evaluation reporting plans for steady state.
The full report is available here - Automatic enrolment evaluation report 2018