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Cass Business School: Misselling fears stop auto-enrolment extension to low earners

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Cass Business School professor David Blake says the Government fears a misselling scandal if it extends auto-enrolment to include all lower earners.

Speaking at a Strategic Society Centre debate on pensions contributions today, Trade Union Congress pensions policy officer Helen Nadin re-iterated calls to widen auto-enrolment qualifying and earnings bands to take contributions from the first pound of pay.

Currently auto-enrolment contributions kick in above the personal allowance level, which currently stands at £9,440 and is due to rise to £10,000 in April.

Blake said: “The reason it doesn’t happen is because the Government is concerned about misselling. It is concerned that if poor people are effectively soft compelled to join a scheme they could end up far worse off with no means tested benefits and their money becomes worthless.

“That was part of the calculation but if we can get over that it would be great to get people saving more at a lower level. There will always be those waiting to say auto-enrolment is a disaster.”

Association of British Insurers head of savings and retirement Yvonne Braun backed allowing contributions from the first pound as a “dramatic simplification”. She said any move would need to be accompanied by an advice or guidance service to stop low earners being detrimentally affected.

But Department for Work and Pensions deputy director of pensions and ageing Adrian Richards said extending auto-enrolment could increase complexity.

He said: “It is very complex and it is costly for advice at the lower end. For those employers with part-time workers on small incomes, they are not paying tax or national insurance contributions, so it adds a complexity to them that they may not want.”

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Auto-enrolment: pay attention or pay the price

By Simon Fletcher

As a chief executive officer of a business in the financial services sector, I have been dealing with the introduction of auto-enrolment for our clients for some time, but I can also speak from an employer’s point of view, having to go through the process ourselves.

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