The Institute for Fiscal Studies (IFS) has suggested that employers should be required to continue paying into employees' pensions even if the employee chooses to opt out. Investment managers Quilter calculated how much an average earner could amass through 3 per cent contributions alone by age 67, revealing a potential pot of nearly £250,000. However, experts warn that this may not be enough for a comfortable retirement and that employees could be tempted to opt out knowing their employer will still contribute.
IFS suggests employers should have to pay into pots even if staff do not - but experts warn about opting out of a workplace pension
However, currently, if employees choose to opt out of paying into a workplace pension, their employer does not have to pay anything in. Quilter suggests that if an employee were to opt out of their pension for their entire working life – from 22 to 67 – but had their employer pay in 3 per cent of their salary for that entire time, they could end up with the following, depending on their earnings:The calculations assume their salary goes up by 3 per cent each year, their fund grows by 5 per cent, and they are charged 0.5 per cent in fees by their platform.
He added that the proposals from the IFS posed a “risk” that some employees could opt out of their own pensions, if they knew their employer would have to pay in regardless.
Pension Workplace Pension IFS Retirement Savings Opt Out
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