Former Downing Street policy adviser Dan Corry has cast doubt on the impact automatic enrolment will having on overall savings levels in the UK.
Auto-enrolment began for the UK’s largest employers in October last year, with firms required to offer their staff a pension scheme and contribute at least 1 per cent of band earnings.
The reforms are being phased in for medium and small employers until 2018. Minimum contributions will eventually rise to 4 per cent for employees and 3 per cent for employers in October 2018, with an additional 1 per cent coming through tax relief.
Speaking at a Nest debate in London this week, Corry, who was previously head of the No. 10 policy unit and is now chief executive of consultancy firm New Philanthropy Capital, questioned whether Government policy can affect the total amount people choose to save.
He said: “I have always worried about whether there is much that policy can do to increase aggregate saving.
“All the evidence we know about tax advantages for savings suggests the only impact it has is on the allocation of people’s savings, but it doesn’t really impact on aggregate savings.
“If we are now pushing people to save through auto-enrolment, there is a question about whether they will save less somewhere else.”
DWP analysis of the first six months of auto-enrolment, published in August, suggests just 9 per cent of people had chosen to opt-out of a workplace pension.
However, Corry warned opt-out figures “can only get worse” as smaller firms reach their staging date and minimum contributions rise.