Jane Curtis, Immediate Past President of the Institute and Faculty of Actuaries comments on the introduction of auto-enrolment in the UK

“Auto-enrolment is a positive step forward in the battle to encourage individuals to save for their retirement. However by effectively helping individuals to save without realising it there is the danger that they may sleepwalk into retirement without enough money in their pension pot to fund the lifestyles that they want to maintain when they leave work.

“To illustrate this; the minimum contribution for NEST will be 8% per year by 2018.  For an individual earning £20,000 a year and assuming a 5% employee and 3% employer contribution for 20 years the NEST calculator assumes that the pension pot will be worth £47,000 in today’s money, which equates to a tax free lump sum on retirement of £11,700 and an annual income for the rest of life of £1,600. Adding this to the present basic state pension of just under £6,000 a year and someone earning £20,000 a year would experience a significant 65% drop in annual income.

“Of course there are many factors that will affect the value of an individual’s pension pot over time, but what these figures illustrate is that it is as important for each individual to be engaged in saving for their future as it is to automatically enrol them into doing so. This is a communication and education challenge for both the Government and employers and one where the expertise of the architects of pension products, such as actuaries, will have a key role to play.”

~Ends~

 
For further editorial information please contact:

Michael Scanlan, PR and Public Affairs Manager – michael.scanlan@actuaries.org.uk or 020 7632 1453
 

Editorial Notes:

 
1. Actuaries provide commercial, financial and prudential advice on the management of a business’s assets and liabilities, especially where long term management and planning are critical to the success of any business venture. They also advise individuals, and advise on social and public interest issues.

 
2. Members of the Profession have a statutory role in the supervision of pension funds and life insurance companies. They also have a statutory role to provide actuarial opinions for managing agents at Lloyd’s.
 

3. The Profession is governed by the Institute and Faculty of Actuaries. A rigorous examination system is supported by a programme of continuing professional development and a professional code of conduct supports high standards reflecting the significant role of the Profession in society.

 
4. The Profession is available to provide expert comment to the media on a range of actuarial- related issues, including enterprise risk management, finance and investment, general insurance, health and care, life assurance, mortality, and pensions.