"It has already increased the number of people saving for retirement by 6.7 million and is projected to eventually boost annual savings by £15 billion a year; this is powerful stuff."
Its data shows that automatic enrolment increased pension participation among those eligible by 37 percentage points, so that by April 2015, 88% of these private sector employees were members of a workplace pension scheme.
In contrast, prior to automatic enrolment around half of these employees were members of a workplace pension and membership had been falling over time.
The research also found that AE boosted pension coverage by the most among those aged 22 to 29, those earning between £10,000 and £17,000 per year, and those who have been with their current employer for less than a year.
For each of these groups, for whom pre-reform coverage rates were particularly low, automatic enrolment has increased membership rates in workplace pensions by over 50 percentage points. In 2015 coverage among all of these groups had risen to over 80%.
AE has also more than doubled membership of workplace pensions among those not directly targeted by the policy. Those not eligible are: employees aged under 22, employees over the state pension age, those earning less than £10,000 per year, and those who just joined their employer.
Automatic enrolment increased pension membership rates across these groups by 18 percentage points, compared to a baseline of 15% prior to the reform. The effect was a particularly large 28 percentage points among those earning under £10,000 per year (compared to a baseline of 18% prior to the reform).
Jonathan Cribb, a Senior Research Economist at the IFS, said: "Automatic enrolment has been very successful in boosting membership of workplace pensions. This has been particularly true of younger employees aged 22 to 29 and relatively low earners on between £10,000 and £16,000 per year. Significant numbers of those not directly targeted by the policy have also been brought into workplace pensions, such as those earning less than £10,000. The story of automatic enrolment is certainly a case of so far so good. A key issue is whether those brought into workplace pensions at low contribution rates will remain in when minimum contribution rates start rising."
Tom McPhail, Head of retirement policy at Hargreaves Lansdown, added: “Auto-enrolment is proving to be one of the most successful policy interventions of the 21st century so far. It has already increased the number of people saving for retirement by 6.7 million and is projected to eventually boost annual savings by £15 billion a year; this is powerful stuff. However there is still a huge amount more to be done and next year’s review by the DWP will set the agenda for the next phase. If we don’t keep moving forwards with the reforms, there is a risk that much of this initial good work could yet be wasted.”
