The Government is being urged to follow up the review of automatic enrolment with research into the dynamics of the labour market.
In an interview with Money Marketing, Legal & General pensions strategy director Adrian Boulding and former EEF head of employment policy David Yeandle, who co-authored the Making Auto-enrolment Work review alongside Institute for Fiscal Studies research fellow Paul Johnson, say the Government should consider future savings measures targeted at people earning the minimum wage.
The review, published last week, concludes that “relatively few people” have low earnings throughout their lives. Furthermore, most low-earners live in family units and have a working partner with “significant earnings”.
Yeandle says: “It is really difficult to send a message to people, even those earning very low wages, that it is not worth saving. That is a message of despair and lack of hope.
“We looked at the dynamics of the labour market and the earnings’ lifecycle. Very few people stay on the same wage for their entire career.
“In fact, quite often, people will start on a low wage and progress quite quickly. I think we have started a very serious piece of work on the dynamics of the labour market.”
Yeandle says concessions made for employers, including a simplification of the self-certification process, were necessary to provide greater certainty.
“We wanted to give employers and individuals certainty,” says Yeandle. “Some of the large employers need a 12-month window to get their systems in place.”
Boulding says a key message from the review was the importance of the “persistency of saving”. He adds: “Given more time, we would have liked to have done more work on pay to save. People should not be scared of means-testing.”
Boulding reveals that while alternative state pension structures were discussed, the proposals put forward were designed to work under the previous administration’s system.
He says that all public bodies involved in the reforms need to communicate the implications to those affected.
He says: “The Government, The Pensions Regulator and Nest now have a huge role in communicating this to the public and it has to be a coherent message.”