Auto-enrolment stifles workplace savings revolution

Fidelity data reveals staff with a workplace ISA save an average of £261 a month – compared with the average of £250 for all pensions, according to HM Revenue & Customs data.

HMRC’s pension saving figure is lower than £250 for those in occupational defined contribution schemes.

Rob Fisher, head of marketing, DC and workplace savings business at Fidelity, said: “We are big fans of saving into both pensions and ISAs, as together they offer complementary benefits for employees. It is not a question of encouraging more savings into one or the other, but encouraging people to save more overall.”

Also, DC specialists believe twice as many employees would currently have access to ISAs alongside their pension schemes without the introduction of auto-enrolment.

They say having to wrestle with the costs incurred by auto-enrolment and the distraction of complying with legislation and regulations surrounding the policy means employers have not been able to give as much funding or attention to ISAs than they would have otherwise.

Fewer than 200 UK companies currently offer their staff a workplace ISA, whereas around 150,000 employers provide pension schemes, and this number will rise sharply when the auto-enrolment process is complete.

Emma Douglas, partner at Mercer, said employers are more likely to be driven by legislation and regulation than providing “nice” benefits packages for their employees.

She added: “There are, of course, those who want to do more for their workers than just comply with the bare minimum, but perhaps we would have seen more action and less talk on ISAs without auto-enrolment.”

And Jamie Jenkins, head of employee wealth at Standard Life, said: “Businesses are wrestling with the affordability of auto-enrolment, which means there’s definitely less activity in this space.

But despite this, we’re still seeing some of them developing schemes where staff can gain access to workplace ISAs, provided they take up pensions as well.”

Almost a third of adults in the UK have a personal ISA.