Blog: Govt must act quicker to increase spread of auto-enrolment

Over the past week or two, my inbox has been flooded with press releases in preparation for the jump in auto-enrolment contributions, due to take place tomorrow (6 April).

Of these, I would say at least 95 per cent have hailed the success of the 10 million that have been enrolled, as well as the jump in savings that people will now experience from this latest bump contributions, and rightly so.

But what I hope the government and industry don’t forget, is the challenge that is still facing millions of savers in the UK.

It has been said that we are facing “pensioner poverty”, so it is hard to understand why the government is not pressing ahead with plans to decrease the lower earnings limit of those eligible to be auto-enrolled from the first pound earned, as well as lowering the age limit from 22 to 18 (why not 16?) as a matter of urgency.

The 2017 AE Review made clear these proposals would not be implemented until the mid-2020s, that’s six more years, a serial waste of time for people to whom those savings would be extremely valuable in later life.

Trade Congress Union research recently found that a six year delay in scrapping the limit could hit a savers’ pot by £12,000.

In a House of Commons debate last month, Pensions Minister, Guy Opperman, acknowledged the “pressure” to speed up the increases, but said the upcoming changes are “complicated process” which will take time to understand.

Is this the real reason? It would seem blindingly obvious to anybody looking in on the industry the positive effect AE has had – so what are we waiting for?

It has been argued that the delay is more for businesses than for the member, allowing them to get to grips with the increases, but do they really need six years to determine how this will impact their cash flow.

On top of this, you have a group of workers (approximately 4.8 million of them) who are still waiting for assistance to help them save.

A recent survey found that self-employed workers face working to until they are 79 in order to build a pension pot big enough to support them. While this can be regarded as an issue that is genuinely complex, and initiatives such as side-car savings look like they could offer some sort of solution, there is a sense of to-little to-late.

The rise to a total of 8 per cent contributions is a positive step, but by some estimates is almost half of what we should be saving, while capturing those who aren’t currently saving a bean, must surely be a top priority for the government.

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