There is still a lack of consensus around some of the key features of auto-enrolment, including who should be included in the scheme, according to the chairs of the group working on the Government’s review.
The Department for Work & Pensions published its terms of reference for the review in February. That document said the review would focus on the coverage of auto-enrolment, engagement, future contributions, simplifying the system, the charge cap, and also wider policy changes such as the new state pension, the Lifetime Isa and pension freedoms.
It also named the three industry experts who would lead an advisory group charged with giving advice to the DWP, which will inform a report expected to be laid before Parliament before the end of the year.
Speaking at the Pensions and Lifetime Savings Association conference in Manchester last week, the three chairs — Standard Life pensions strategy head Jamie Jenkins, The People’s Pension trustee director Ruston Smith and Pensions Policy Institute director Chris Curry — explained to delegates their thinking so far.
Jenkins, who is responsible for reviewing the coverage of auto-enrolment, said the working group had asked if anyone should be excluded from auto-enrolment.
He said: “Generally speaking, the response has been that that would be a dangerous precedent. The response so far has been that people should not be excluded.”
Jenkins said the next question was whether more people should be included in auto-enrolment. Indeed, several providers — including Royal London and Aviva — have put forward suggestions for how self-employed workers could be included in a potential form of auto-enrolment.
However, he said: “There is little consensus as to who that should be. The self-employed are not a homogenous group of people. That does not lend itself to one solution and that has been quite clear in the feedback. Few people agree on how or which groups.”
Curry, who was tasked with looking into an evidence base for future contributions, said there was no consensus on the right level of contribution, when new levels should be implemented or who should bear the burden for a potential increase.
He said: “It will be difficult to come up with a single answer in the short term and it is right the review has decided that now is not the right time to decide what the rate should be in the future.”
Minimum total auto-enrolment contributions are set to increase from 2 per cent to 5 per cent in April 2018 and then to 8 per cent in April 2019.
Curry says: “What we don’t know is how individuals are going to react when contributions increase next April. Because it is coming in as a number of other things change, people may not be aware, and we know that inertia is very powerful so we may not see much change in behaviour. It is important we have facts on which to base the results.”
Smith was charged with looking into ways of strengthening engagement with savers and workplace pensions. He says two themes to come out of the review so far are the language used around pensions and how annual statements sent to customers could be improved.
Smith says inertia plays a role in people staying enrolled in their workplace pension but advertising from the DWP and work from employers has also reinforced the message.
Pensions minister Guy Opperman was also speaking at the conference and said he hoped to deliver the initial report to Parliament in the week of 6 December.
Opperman said: “I am utterly passionate about auto-enrolment and committed to it. I want to make the case that it is good for employers as well as employees.
“Success won’t be achieved by getting auto-enrolment to work for all. We need the schemes to be well governed and efficient with transparent costs and charges.”