This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.
X
MM+cover+small+180914
Categories:Pensions,Politics

Auto-enrolment delay will cost £5bn in lost savings

  • Print
  • Comments (3)

Legal & General pensions strategy director Adrian Boulding says the delay to the auto-enrolment timetable announced earlier this week will reduce pension saving by £5bn.

On Monday, pensions minister Steve Webb announced auto-enrolment will be delayed for small firms until after 2015 and said any employer expecting to auto-enrol their staff after July 2013 could see their staging date pushed back. This could include firms of up to 3,000 employees. The introduction of the full 8 per cent contribution rate will also be delayed. The Government will set out new dates early next year.

Giving evidence to the work and pensions select committee this morning, Boulding said the changes would hit savings levels.

He said: “It will have a significant effect on pensions saving. I did the calculations last night and it means £5bn less will go into workers’ pensions accounts as a result of those delays on small and medium and large firms.”

Friends Life head of corporate benefits marketing Martin Palmer agreed, adding that the changes increase the risk of employers levelling down their contributions.

He said: “When firms automatically enrol people who are not already in schemes, we hope they will keep contributions at the current level. The problem is by delaying the date those individuals must be increased up to 2 and 3 per cent you are effectively lengthening that period and for the employer that is suffering financial hardship they might be encouraged to level down.”

NOW:Pensions advisory board member and ex-Conservative MP and Shadow pensions minister Nigel Waterson told MPs the move would seriously undermine people’s retirement income.

He said: “A whole chunk of Turner’s target audience are just taken, at one stroke out of pension saving. Even on the current timetable they would have a big gap they will never be able to make up in their pension pot and this is only going to make it worse.”

  • Print
  • Comments (3)

Daily Email Updates
If you enjoyed this article, sign up to receive the latest news and analysis from Money Marketing.

The Money Marketing CPD Centre
Build your annual CPD - you can log and plan your CPD hours for free with The Money Marketing CPD Centre.

Taxbriefs Advantage
Advantage is a digital reference source giving unbiased, independent, answers to your technical queries. Subscribe to Taxbriefs Advantage.

Readers' comments (3)

  • Whilst I see this may be a sort term saving to employers, it doesn't put off the inevitable.

    Unsuitable or offensive? Report this comment

  • It could only be Adrian Boulding.

    Adrian: the average 22 to 45 year old has better things to do with their money than save for a compulsory pension in addition to NI..

    Why am I so vociferous?

    Adrian Boulding was making the same inept observations during the debates on Stakeholder Pensions even when it was pointed out to him that the consumer benefits were dubious and the detriment to his employer Legal and General were even worse as they (L&G) would not make a penny piece for their shareholders or, more importantly, their with profits policyholders for at least 25 years, by which time a large investment house would have spirited the funds away for their benefit as they would have avoided all of the ‘set up’ acquisition costs.

    I was vilified by the banks and insurance companies vying for position in the Stakeholder arena. Everything that was said then has come to pass.

    In the current situation 18% of band earnings (approximately) purchases state pension benefits. Each employee (through their employer) contributes 25.8% of band earnings to NI. The government should offset the new ‘invested’ NEST arrangement 1 for 1 against NI (a pay as you go system) and then Adrian might at least be credited with getting the consumer cost into perspective despite the fact that L&G will once again lose money if they enter this market.

    Unsuitable or offensive? Report this comment

  • from the bloke who gave us Stakeholder we now get a drive to support low paid people saving for something which isn't worth their while, just because it might be good for L&G

    i hope employers vote with their pens and shun L&G

    Unsuitable or offensive? Report this comment

Have your sayEdit my profile/screen name

You must sign in to make a comment

Fund Data

Editor's Pick



Poll

Is Labour right to be concerned about the unintended consequences of the Budget pension reforms?

Job of the week

Latest jobs

View all jobs

Most recent comments

View more comments