Auto-enrolment minimum contribution rates of 12 per cent would be “too much”, Minister for Pensions Steve Webb has said.

Speaking at a Nest conference today in London, chair Lawrence Churchill said he would like to see the AE contribution minimum hit 12 per cent by 2022 by which time Australia will have around the same contribution level.

Webb responded, however, by stating that whilst 8 per cent is not enough, “whether going in at 12 per cent in an entirely voluntary inertia driven opt out world is just too much”.

“For people starting their first job and then having 12 per cent taken out of their salary is quite a hit,” he commented.

“I would be inclined to go for auto-escalation, so people enter a new job at an 8 per cent contribution level and unless they opt out, every time they get a pay rise the contribution rises. I sense that in the spirit of avoiding opt-outs, unless you have compulsion you probably have to come in at a gentle level of contributions, and then auto-escalate. Inertia can be used in the auto escalation process.”

Webb added that the next government’s pension agenda “should be set very early on” so decisions can be made early to follow on from what has already been achieved in the industry.

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