AE employer contribution levels seen as 'weak', Nest expert says

Written by Theo Andrew
08/06/18

The current split between employer and employee auto-enrolled pension contributions is “weak” some feel, and the pensions community must come together to get us to “the next level of saving”, a Nest pension expert has suggested.

Speaking at the Pensions Europe conference, The Future of Work and Pensions, yesterday, 7 June 2018, Nest director of strategy Zoe Alexander said that many felt that auto-enrolment pension contributions should be split equally, but added that the current political climate might make it difficult.

In April, auto-enrolled pension savers saw their savings rise to 5 per cent, made up of 3 per cent employee and 2 per cent employer contributions, the first of two nudges that will see contributions rise to 8 per cent in 2019, when the employer will contribute 3 per cent and employees 5 per cent.

Alexander said: “There are lots of people now thinking we should move to 50/50, because next year we get employees contributing 5 per cent and employees 3 per cent and that’s a bit weak isn’t it.”

When asked if anything could have been done differently when the structure of auto-enrolment was being developed, Alexander said she would have gone “harder, faster” on employer contribution levels.

“The political environment for that was quite pleasant at the time, we were in the middle of a Labour administration which was stable and politics was in quite a sensible place. It would be quite difficult to get the heavyweight policy now and countries are going through a lot of political turmoil to get that level of thinking let alone legislation."

According to the latest government figures, the total amount saved into workplace pensions increased by £4.3bn to £90.3bn in 2017.

Despite this, it is widely considered that employees are under saving and that overall contribution levels should be around 12 per cent or more.

“The consistent support of the original pensions commissioners for the automatic enrolment programme has provided a level of continuity that has been helpful, reminding people of the rigorous analysis and thought that went into their original report, which was critical to building the political consensus behind automatic enrolment .

“As we move forward with automatic enrolment we need all the players - politicians of both parties, employers and stakeholders - to remember the reasons why we set up automatic enrolment in the first place, and to work together to consider how to get people to the next level of saving”, she added.

Furthermore, Alexander said that the schemes that are doing well such as Nest, The People’s Pension and Smart Pension, have embraced digital from the word go and making their function work really well for small employers and tailoring their offering to the member.

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