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Govt needs to go further on auto-enrolment, experts warn

workplace pensions

The Government’s decision to freeze the auto-enrolment earnings trigger at £10,000 may not go far enough to bring more people into retirement saving, pension experts say.

The Government announced earlier this week it would maintain the salary threshold at which employees are automatically enrolled, though it will increase the lower earnings band on which contributions are assessed from £5,824 to £5,876 and the upper earnings band from £43,000 to £45,000. It estimates an additional £71m will flow into pension savings as a result of the change.

But pensions experts say that more workers, including those with multiple part-time or low-paid jobs, will need to be auto-enrolled to achieve a healthy level of pension saving.

Scottish Widows director of employer relationships Jackie Leiper says: “Automatic-enrolment has undoubtedly been a success in getting almost seven million people enrolled into a company pension scheme. But the decision of the Department for Work and Pensions to freeze the trigger at £10,000 for the next tax year will mean the continued exclusion of many part-time and low-paid workers from this valuable benefit.”

Aegon head of pensions Kate Smith says: “Freezing the annual salary threshold at £10,000 for another year should bring more people into pension saving, but with salaries flatlining, we may need to consider going further.”

Smith suggests one way to increase contributions would be to move gradually to a position where contributions apply on all earnings.

Confirmation that next year’s review of auto-enrolment will include how to cater for the self-employed was widely welcomed by the market.

The People’s Pension director of policy and market engagement Darren Philp says: “The review is a chance to iron out some of the wrinkles with the current policy and make sure it continues to be a success. It is a chance to take stock and consider the evidence, and to deal with issues such as excluded groups (including the self-employed), burdens on schemes and employers, and whether the various thresholds continue to be appropriate.

“This is an opportunity to improve an already successful policy and make sure it is fit for purpose as we move into the next decade.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Head of Pension providers says “we need to go further”. I wish I could get the Government to spend buckets and make laws to force the general public to do more business with me.

  2. These ‘experts’ are so transparent. Yes of course they want contributions to increase. They make money out of it. But for the people caught up in this scheme it isn’t going to be the top of their wish list. After around 8 years of no pay increases they are just beginning to see a small rise in their salaries. Unfortunately this is likely to be negated by inflation. But the idea of swiping more out of their pay packet will be about as popular as a dose of pox.

    The government is likely to cock a deaf ear as well, because remember our economy is based on people going shopping and if you decrease their disposable income the economy goes to pot. Never mind what happens in 10 or 20 years’ time – politicians only look as far as the next election.

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