In automatic enrollment (AE), workers are automatically enlisted in an individual pension savings plan, with the possibility of opting out it if they actively decide to do so. This note studies the case of 4 countries that have implemented AE:
- United Kingdom: As of 2012, employers have been required to automatically enroll all their eligible workers in an occupational pension scheme. Between 2012 and 2021, the percentage of employees participating in private pension schemes increased from 46.5% to 79.4% and total savings in occupational schemes rose from GBP 81.7 billion to GBP 114.6 billion.
- New Zealand: Since July 2007, new workers aged 18-65 have been automatically enrolled in an occupational plan with tax incentives (Kiwisaver). Membership has increased steadily since the creation of the program, reaching 3.2 million in 2022, and accumulating NZD 89,708 million in funds as of the same date.
- Poland: The PPK Act came into effect in 2019, creating individual savings plans with AE. AE Is mandatory for people between 18 and 55 years of age. Participation in the PPK was 33.1% at the end of 2022. Since its inception, the funds saved in the PPK have steadily increased to PLN 7.67 billion.
- United States: 12 states and 2 cities have enacted AE in Individual Savings Plans (IRAs), known as Auto IRAs. The Auto IRA is now operational in four states: California, Connecticut, Illinois and Oregon. As of March 2023, the number of accounts in those 4 states amounted to just over 664,000 (a 2.5 times increase as of December 2020), accumulating total savings of USD 780 million.
It can be seen that in all the countries under study, AE programs made a difference and rapidly boosted savings since their implementation. At the same time, the creation and strengthening of AE mechanisms is evidence of the efforts being made by countries worldwide to increase private savings. Countries in Latin America should take advantage of AE benefits and the flexibility its design provides for adapting it to the characteristics and needs of each of them.
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