New scheme joiners should be allowed to make minimum employee contributions of 1 per cent for their first three years, even after minimum contribution rates go up, says Standard Life.
Under auto-enrolment, the minimum employee contribution is just one per cent until 2017. Minimum contributions for all savers including new joiners will then be gradually phased up to 4 per cent by 2018.
The measure is designed to ensure fewer people are put off saving by perceived high contributions in the initial years of being auto-enrolled.
Speaking at the Money Marketing auto-enrolment invitational in London last week, Standard Life suggested keeping minimum contribution rates for new joiners at 1 per cent for longer.
Speaking in a panel debate, head of proposition for SME and new markets Alan Ritchie said: “I am nervous about what happens when the minimum goes up. One idea the Government and others could consider is not making it 3 per cent for new members from 2018. Maybe we should still allow new joiners to start at 1 per cent and then phase up after that.”
In August, the Department for Work and Pensions published figures suggesting the average auto-enrolment opt-out rate was 9 per cent.
But Nest central account manager Paul Budgen said: “Before we all start congratulating ourselves we should look at it in two to three years and see if the numbers are still the same. The current opt-out rate is nice but lets not get carried away. There is still a big job to do.”
Syndaxi Chartered Financial Planners managing director Robert Reid says: “This is not a good idea. The last thing we need to do is tell people they can put less in their pension.”