In an interview with Money Marketing at the Conservative conference in Manchester, Shadow pensions minister Nigel Waterson revealed the Tories are furious they were not consulted on changes to auto-enrolment timeframes. He says: “ I think that does cast a real shadow over the whole project.”
Last month, the Department for Work and Pensions announced the timescale for implementation of auto-enrolment will now be three years from October 2012 instead of 18 months to give employers and administrators more time to complete the process. It also pushed back by a year the deadline for employers to reach the full 3 per cent employer contribution on banded earnings from October 2015 to October 2016.
Waterson said the “huge delay” potentially “changes everything” as to whether personal accounts will work or not. He said: “Whatever happened to consensus? I would have expected that, if not the Government, then certainly the Personal Accounts Delivery Authority would have had a word with us warning us of this announcement. We were as surprised as anyone else when that announcement was made. It is incredibly serious because it means some people will not be getting the full contributions until 2016.”
Waterson said he was particularly concerned that smaller employers are at the end of the queue for phasing in. He said: “Something that Lord Turner thought should start in 2010 for some people will not start properly until 2016, which means that there are years and years of contributions that can never be made up by people on modest incomes. I think that does cast a real shadow over the whole project.”
Plans for a lifetime savings account were included in the last Tory manifesto in 2005. Industry experts believe the auto-enrolment delay has focused Tory minds on radical changes to the scheme. Proposals may include the promotion of workplace Isas.
Waterson says: “We are looking at all sorts of flexibilities. I think we might get away from the notion of pensions and look at lifetime savings. We have not got a developed policy yet. All I can say is that we are certainly looking at the Kiwi saver model quite closely.”
Under New Zealand’s Kiwisaver, people can access their pension savings to buy a first home, fund healthcare if they become seriously ill, deal with financial hardship or if they are moving overseas.
Cicero Consulting director Iain Anderson says: “The Conservatives are certainly angered by the Government’s recent moves on personal accounts and are looking at plan B actively now. This includes promoting the Isa as the main vehicle for lower-income-earners as part of likely lifetime savings proposals.”