Lack of employer contribution hindering workplace pension growth

Aviva Report Found Employer Contribution can Drive Workplace Pension Growth

Aviva Report Found Employer Contribution can Drive Workplace Pension Growth

A recent survey by insurance major Aviva shows that 74 percent of UK family heads will be happy to contribute to a workplace pension scheme if their employer contributed matching amounts. Presently only 28 percent contributes to a workplace pension scheme.

According to the Family Finances report published by Aviva, 40 percent of British family heads also cited affordability as the major deterrent while 72 percent currently do not contribute to a workplace pension.

When the auto-enrolment scheme is launched in 2012, only 15 percent of people will choose to opt out of the scheme, the report found. Significant effort should be put by the stakeholders to create awareness about the scheme, the report added.

The survey found that 12 percent people were apprehensive about the suitability of the scheme while 20 percent had no serious thoughts on auto-enrolments. 16 percent were worried that it may impact their take-home pay.

Of the 74 percent of Britons who were willing to contribute to a work place pension if their employer contributed a matching amount; 5 percent contribution of annual salary was the most popular choice, followed by 2 percent and 3 percent.

Aviva found that a 5 percent contribution over a 44 year working life period with a median salary of £25,879 could result in a pension pot of £252,438, after factoring in matching employer contribution, inflation and investment growth.

The size of the present average annuity pot is £30,000.

Warning that there is “much work to be done”, Paul Goodwin, head of pensions marketing at Aviva said workplace pensions will play a ‘significant role’ in mitigating UK’s pension crisis.

“A lack of understanding around pensions is also seriously hampering take-up rates, so for the long-term interests of families in the UK, all parties concerned need to work hard to ensure that auto-enrolment is a success”, he added.

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