Leader: Can auto-enrolment take the strain of constant pensions change?

Natalie Holt, journalist with Money Marketing Photo by Michael Walter/Troika

Auto-enrolment is said to be ticking along nicely. Opt-out rates are low, rollout among the smallest firms continues in the background, and employers that fail to comply, including Swindon Town Football Club no less, are being made an example of with punitive fines.

Of course, there is more to it than that. Expensive purple monsters aside, there are concerns emerging in the auto-enrolment market that the pensions industry needs to get to grips with. What are the appropriate contribution levels? At what point should these be increased? Who should be auto-enrolled? And do we really have the appropriate framework to deliver the best outcomes for pension savers? All these questions still hang in the air.

Auto-enrolment was set in train first, but with the introduction of pension freedoms and the looming Lifetime Isa, the initiative looks set to be one of the major casualties of the shifting sands of pension policymaking. This Government has staked its claim on freedom and choice, which does not sit that well with the “compulsion-lite” approach of auto-enrolment.

But what do the people who set us on this path make of it all?

Money Marketing has interviewed the three pensions heavyweights behind the original ‘Making auto-enrolment work’ report in 2010 – Paul Johnson, David Yeandle and Adrian Boulding, to find out what future they see for the auto-enrolment project.

The widely held view is the 8 per cent minimum contribution level by April 2019 is nowhere near enough. Usually that is stoked by those with vested interests that stand to gain from more money flowing into pension funds.

Surprisingly though, our pension bigwigs caution against moving quicker and harder on contribution levels. They say given stagnant wage growth, and the risk of scaring employees off, now is not the time to push for higher levels of pension saving.

There is also another elephant in the room – the question of whether Nest is fit for purpose. It is all well and good that as a taxpayer-funded organisation it cannot be seen to be losing money. But as the fallback scheme of choice, is there also not a case to answer on whether savers are losing out from comparatively poor returns?

Ultimately, we cannot wait too long to start trying to answer all these questions. Because the risk is when people go to avail of themselves of the freedom to access their pension, all they will find is a measly pot which amounts to not very much at all.