Following yesterday’s Spring Budget, UK pension schemes have expressed disappointment over the lack of a timetable for the expansion of automatic enrolment.
Chancellor of the exchequer Jeremy Hunt made a number of announcements in the Spring Budget yesterday. However, pension schemes were left disappointed as auto-enrolment was not mentioned in either the hour-long speech or the 98-page-long document accompanying it.
The auto-enrolment extension bill has been granted Royal Assent back in September.
The bill, introduced in the House of Commons by member of parliament (MP) Jonathan Gullis and taken through the House of Lords by Baroness Ros Altmann, creates powers to scrap the lower earnings limit and reduce the age for auto-enrolment, the landmark pensions policy which sees eligible employees made members of their workplace pension scheme without needing to ask.
The changes to auto-enrolment, combined with the Mansion House Reforms announced by the chancellor in July, could see the average earner’s pension increase by nearly 50% if saving across their entire career, while a minimum wage earner could see their pension pot increase by over 85%.
However, there are still no details over a timeline for the introduction of the changes and many hoped that the Spring Budget would deliver on this important piece of the puzzle.
Jamie Fiveash, chief executive officer of Smart Pensions, told IPE that he is “disappointed” that there is still no timeline for amendments and widening of the scope yet.
“It is a bit of a disappointment that there wasn’t even some more colour given to that, even an indication of ‘we’re supportive and now we need to do more’ or ‘we’re going to look at it’. It was a bit disappointing,” he said.
Fiveash acknowledged that there are some challenges to extending the auto-enrolment, such as putting more pressure on employees to pay more contributions, and then on employers to match them given the current economic climate.
“I understand why they [UK government] wouldn’t set a timetable for further progression, but they should have set a timetable for the stuff that we’ve already agreed. They should be saying: ‘We want to look at a long-term plan for pensions that gets people adequate income in retirement’. That would be a good thing to say,” he noted.
CEO of Now: Pensions, Patrick Luthi, agreed that this was “another lost opportunity” for the development of a roadmap for auto-enrolment “which tackles the core challenge of adequacy and fairness for savers” and which includes the implementation of the auto-enrolment 2017 review.
For Gail Izat, managing director for workplace at Standard Life, the absence of a decision on the rollout of the auto-enrolment reform is a “real missed opportunity” to help the future finances of millions of people.
She said: “It’s crystal clear that we need a greater focus on savings adequacy in the UK and a delay to consulting implementing auto-enrolment reform is further damaging the long-term saving prospects of our youngest workers.”
Izat pointed out that with around 14 million defined contribution pension savers currently not on track for their expected retirement income, according to Phoenix Insights, Phoenix Group’s longevity think tank, it’s “more important than ever” to get everyone saving from day one of work.
She said: “We don’t have the luxury to wait any longer if people are to have a chance of securing a decent standard of living in retirement.”
Read the digital edition of IPE’s latest magazine
No comments yet