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Pension minister says work needed to keep AE opt-out rates low

Pensions minister Guy Opperman says his main priority is to maintain low opt-out rates from workplace schemes, even as members see their contributions rise this year.

Auto-enrolment contribution rates are set to rise to 8 per cent from April with policymakers keeping a close eye on how it affects future saving patterns.

In January a survey of nearly 350 employers by the Association of Consulting Actuaries showed employers are predicting opt-out rates will remain low as the increase bites.

But today Opperman called on the industry to not be complacent about the success of auto-enrolment in a speech at the annual pensions conference of the Trades Union Congress.

He argued that businesses supporting workers to save more for their future will benefit from better productivity and reputations.

Opperman said: “You [delegates at the conference] must use your influence and make the case to businesses about the benefits of doing the right things in this matter [auto-enrolment].

“It will be more difficult to take auto-enrolment forward if the case is not made for it and I have met Australian politicians who have made this very point to me.”

Opperman also gave an update on the progress of the collective defined contribution consultation that closed on 16 January. The government is now reviewing consultation responses.

Officials at the Department for Work and Pensions have been working closely with Royal Mail and the Communication Workers Union to develop proposals for the introduction of CDCs.

He said: “CDC is not a magic bullet but I believe, to mention Tony Blair, it is a possible third-way between defined benefit and defined contribution plans. It is not only for Royal Mail but for other organisations as well.”

Opperman also discussed a consultation launched today where the government hopes to unlock investment by making it easier for pension schemes to fund start-up companies and infrastructure projects.

The proposals include requiring large schemes to report their policy on these types of investment and changing how schemes calculate charges.

It would also require smaller schemes to assess, every three years, whether they should consolidate into a larger scheme.

Opperman said: “Pension schemes could consider opportunities for more innovative, long-term investment offering members the potential for better returns – and the UK economy billions of pounds of funding that can boost jobs, productivity and growth.

“We can do more to attract new investment into important sectors of the economy which would boost employment and help to build stronger, more sustainable communities. At the same time, this approach would give savers more pride in their pensions while delivering good returns.”

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Guide: 10 required letters — what to send, to whom and when?

This guide from Johnson Fleming will take you through the required communication and also give ideas for additional actions that will ensure your auto-enrolment project is a success. The topics in this guide include: the letters you need to send out; what to send and when; the importance of employee engagement; and what to consider as additional communication.

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