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Pensions minister faces calls to boost auto-enrolment rates

Pensions

Unions and pension providers have written to the pensions minister urging him not to postpone a planned increase in auto-enrolment rates.

The Trades Union Congress, Age UK, the Association of Consulting Actuaries, the People’s Pension and Now Pensions have all written to Richard Harrington asking him to press ahead with raising the combined minimum earnings threshold from the current 2 per cent to 5 per cent in 2018 and 8 per cent by 2019, the Financial Times reports.

The letter comes after comments made by Harrington in an interview last week that he may want to let the reforms “bed in” before taking any further decision on rates.

The signatories to the letter say that without a “long term vision” of satisfactory rates, workers could be left with “inadequate savings to provide for a good standard of living,” and that Harrington should make a decision on further rate rises at the earliest opportunity.

The signatories say: “The 2017 review of automatic enrolment provides a valuable opportunity to create a vision for pension saving and retirement outcomes, and to begin building a consensual approach towards defining the role of automatic enrolment in future pensions and savings policy.

“The forthcoming review should therefore be as wide-ranging as possible.”

Others in the pensions industry have spoken out against the auto-enrolment timetable, however, including Pensions and Lifetime Savings Association and lobby group the CBI.

The organisations argue that the impact of increasing rates on businesses and workers should be assessed before it is moved further.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. There’s a danger people will see AE as another failed ‘stakeholder-type’ initiative who then decide to opt out because a 1% employer contribution isn’t sufficient justification to remain in a scheme.

    Furthermore, the ‘time cost’ of starting and then running with AE for many is relatively high compared to the actual cost of contributions – yes we’re in a low wage growth environment BUT this has been in the pipeline for years and has already been kicked back a few months – the danger of kicking it further down the line will add support to the argument from some employers that it’s a waste of time and won’t work – likely leading to an increase in non-compliance.

  2. The vast majority of staff I present to fully accept the need to do something about saving for their own retirement. If HMG kicks the increase to the right – again – the whole project will risk being devalued and more people will Opt Out IMO.
    The fact that HM Treasury will not “give away” as much tax relief is of course totally unconnected…

  3. I predict that AE will be the next ‘mis-selling’ scandal. The contribution rates are paltry and will not provide a decent retirement income. How can anyone believe that? A decent DB scheme used to cost 15-20% of payroll, a DC arrangement paying a fraction of that amount will simply not suffice. Many people would love to fund for a decent pension in retirement but don’t have enough disposable income. I really fear not just for my own retirement but for many future generations as the fundamentals of living for most people can easily be at least as much they earn. Something big has to change e.g. housing and transport costs and expectations of being able to have all the material things that are now taken for granted. E.g. new cars, nights out, expensive holidays & weddings! (The amount some spend on the latter is eyewateringly high and definitely not ‘necessary’!)

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