The bank's very low opt out rates, less than 10%, came as a welcome surprise to a pensions industry, which feared as many as a third of employees would leave their pension scheme.
While opt out rates are a crucial indicator of success of auto-enrolment, standards are important, too, if we are to ensure that employees get the best possible income in retirement. It is very pleasing, therefore, to see many employers using auto-enrolment to breathe new life into their employee benefits packages.
Auto-enrolment is a game-changer and has got off to a good start, although companies have not found it easy to implement. The hardest bit is still to come, with smaller employers beginning the process, many that have fewer resources and less experience of running a pension scheme. That's why we're urging the Government to simplify the rules, so that smaller employers can better cope when tens of thousands of employers start to auto-enrol their workers in April, May and July 2014.
Earlier this year the NAPF launched our auto-enrolment website to guide employers step-by-step through the complex rules and regulations. In short interviews on the website, employers talk about their own experiences and offer advice for employers just starting to think about it.
We are also helping employers to pick a good auto-enrolment scheme, through our independent and acclaimed Pension Quality Mark (PQM), which recognises high quality defined contribution (DC) pension schemes that meet standards of good design, engaging communications and governance. In February, we launched PQM READY for multi-employer schemes.
As auto-enrolment nears full implementation, in 2016 the Government's state pension reforms come into effect and everyone who is eligible will receive a single tier pension (currently estimated at £145 a week). This will provide much-needed clarity for people about how much they need to save in their pension if they want to retire with a good income.
This reform will mean big changes in the way many company pensions are run, and the end of contracting out will see both employers and employees paying higher NI contributions as they lose the current rebates. We've been consulting with the DWP to see how the transition can be handled carefully so that employers, schemes and scheme members are best able to deal with the change.
Even with a solid foundation from the state to start building pension savings, good pension income will not be easy to come by. With £30,000 being the average amount saved in to a DC scheme at the point of retirement, most people will struggle to make ends meet in their retirement years unless they continue to work. On top of this, many of us are expected to live longer than our parents or grandparents, which means we need more money to spend in retirement. This not only increases the financial burden on the state as it looks to pay pensions over a longer time, but it also increases the financial burden on individuals. More people will struggle to save enough and will not be able to afford to retire for a while after they reach state pension age.
To counter this, the Government plans to raise the state pension age to 67 by 2028. The NAPF has for a long time called for an independent body to review and advise on changes to the state pension age and it is good to see that the Government is finally considering this proposal in the Pensions Bill currently going through Parliament.
Individuals need to be encouraged to save more for their retirement but we also need to ensure that they can get a good income out of those savings by buying the best annuity on retirement. The NAPF is driving change in this area by setting up a broking service for DC pension schemes, which will help employers direct their employees towards specialist advice.
We will be discussing all of these issues at the NAPF's Annual Conference and Exhibition 2013, held in Manchester from 16 to 18 October. I hope to see many HR professionals attending so that they can find out more about choosing a good workplace pension that gets the best results for employees. Visit www.napf.co.uk for more details.
Joanne Segars (pictured) is the chief executive of the NAPF
