How successful do you feel that auto-enrolment has been so far?
We believe that auto enrolment has so far proved successful, with high levels of compliance amongst employers and low levels of opt outs among employees, but the biggest challenge is yet to come.
NOW: Pensions was established in 2012 and we now have over one million members including a client base of 23,000 employers, whom we support with their statutory automatic enrolment duties. Over the next year, there are an estimated 700,000 further employers that are currently due to stage.
But, there are millions of workers that have missed out on benefiting from workplace pension saving, and as many as 6.3 million workers assessed by their employer already rejected as being too young, too old or not earning enough. Over half of these, which is in excess of 3 million workers, have been rejected because they did not earn the threshold salary of £10,000pa.
The Government must now focus on a number of key areas, especially towards those who are being excluded from benefiting from a workplace pension. We have produced a six-step approach that we regard should be the government’s main areas of focus, and with the 2017 auto enrolment review just around the corner, this will be an ideal chance to bring even more workers into workplace pension saving, which we believe will safeguard the success of the policy and prove even more take up in the future from UK workers.
What do you feel are the main talking points and issues facing auto enrolment in 2017?
There are certainly three main talking points that will dominate the auto enrolment industry in 2017, these include: The Pensions Bill, the 2017 auto enrolment Review and the Cridland Consultation, a report into increasing State Pension age and working longer into later life. Each of these events will contribute towards the future success and an opportunity to set the direction of travel for the policy.
Do you feel that too many people are still being excluded from auto enrolment?
To ensure that auto enrolment is fairer for all workers, we believe that the lower qualifying earnings band should be removed as this affects all those who are lower paid and all workers deserve a fairer pension, irrespective of their employment pattern.
- The Earnings Threshold to be abolished and all workers aged 22 be included.
- Self-employed are bought into auto enrolment and this should be utilised automatically in the same way that employed workers enjoy. ONS data shows that there are over 7 million part-time employees in the UK.
- To ensure that auto enrolment is fairer for all workers, we believe that the lower qualifying earnings band should be removed as this affects all low paid workers.
Do you feel that more needs to address the issue of adequate contribution levels? Is the Government planning to look at this?
We would urge the Government to carry on and not disturb the planned contribution increases in April 2018 and 2019. We also believe that we need a long-term roadmap that sets a path for the minimum employer contributions to increase to a level that provides adequate pensions. That level might be 12%, made up of 6% from the employer and 6% from the employee. It needs to be reached in a series of baby steps so that increasing contributions pose no threat to the economy.
We conducted research on over 2,000 UK workers and their attitudes towards minimum contribution rates. We found that four in five (82%) are happy for minimum contributions to rise in 2019. However, quite a few people are unaware of how much they’re contributing at present. This is especially the case with over 55 year olds, where 17% didn’t know what they are currently paying in to their pension.
In 2019, when workers are asked to pay in 5% compared to 3% from their employer, 24% said they would consider opting out when minimum contributions are imbalanced. If the roles were reversed and their employer contributed 5% compared to the worker contributing 3%, one in five (21%) say they would definitely not opt out. NOW: Pensions believes that there is a strong case for reviewing the balance between the levels of employer and employee contributions.
Automatic enrolment Declaration of compliance report July 2012 – end December 2016 published by The Pensions Regulator January 2017
Pensions Policy Institute – Automatic Enrolment Changes – A 2016 report based upon modelling commissioned by NOW: Pensions shows that removing the £10,000 earnings threshold, 3.3 million people would qualify for auto enrolment
Office for National Statistics Dataset EMP01 SA: Full-time, part time and temporary workers (seasonally adjusted), identifier YCBN, March 1992 to November 2016