Millions could face pension pot ‘shortfall’

Ex-minister warns firms are not paying enough into workplace schemes

Many of the six million people who have now been automatically placed into a workplace pension are saving far short of what they will need to be able to afford to retire, a former pensions minister has warned.

A report from the Pensions Regulator showed that by the end of March 2016, more than 6.1 million workers had been successfully automatically enrolled since the reforms were introduced in 2012.

The Pensions Regulator said twothirds (66%) of employees are now active members of a pension scheme.

Under the automatic enrolment scheme, employees contribute a portion of their wages into their pension, with contributions also coming from employers as well as tax relief.

Minimum contributions are being gradually phased upwards, so that from April 6 2019 they will increase to 8% of qualifying earnings, of which a minimum of 3% must come from the employer.

But Steve Webb, a former pensions minister who is now director of policy at Royal London, highlighted figures in the report showing what he described as “disappointing” employer contributions so far.

The Pensions Regulator said the average employer contribution so far is 3%.

Mr Webb said: “The 2017 automatic enrolment review needs to consider how we get combined employer and employee contributions up to a realistic level as a matter of urgency.

“Without this, millions of today’s workers will simply find that they cannot afford to retire.”