Industry experts raise pension saving adequacy concerns at WPC hearing

Industry experts have urged the government to outline a timeline for the 2017 auto-enrolment (AE) review reforms, after research revealed that more than half (57 per cent) of Brits aren’t saving enough to maintain their living standard in retirement.

Speaking at a Work and Pensions Committee (WPC) hearing, industry experts highlighted adequacy, pension gaps and participation, and decumulation as key areas of concern, as well as issues around smaller pots, and savings for the self-employed.

In particular, B&CE director of policy, Phil Brown, shared findings from a new report, to be published in early summer, which revealed that 54 per cent of households and 57 per cent of individuals are not saving enough to meet the replacement rates set by the Pension Commission in 2004.

In light of this, Brown argued that whilst AE is a success story that has reversed the decline in workplace pension saving across the UK, the reality is that people still are not saving enough.

"At a time when the cost-of-living crisis is worsening and people are dealing with difficult financial decisions every day, the UK faces a tough choice," he continued.

“Whilst it wouldn’t be right to raise saving rates in the current economic climate, we can’t ignore that people are not saving enough to live on in retirement.

"This year, as AE turns 10, it’s time to renew conversation about how automatic enrolment should evolve once the cost-of-living crisis has abated, to ensure it reaches its full potential. It’s our role to provide evidence but politicians, trade unions and employers need to take the lead.”

This was echoed by Smart Pension director of policy and market engagement, Darren Philp, who argued that there is "almost universal support" for the government to implement the conclusions of the 2017 AE review, describing the proposals as a "sensible evolution" of AE.

"For me it's not a question of policy, it’s a question of how," he continued, clarifying that there may be a wider question as to the potential costs on exchequer could be impacting this, as it could have obvious implications for tax relief.

Whilst the government has repeated to a mid-2020s deadline for the 2017 reforms, Philp argued that it "takes a long time for chose changes to come through the system", suggesting that debates on this issue should begin now.

Now Pensions chair of the board of trustees, Joanne Segars, also stressed the need for a consultation and timeline for the proposed reforms, highlighting a roadmap as "absolutely vital" to allow the industry to prepare operationally.

This sentiment was shared by Royal London director of policy and external affairs, Jamie Jenkins, who stressed that whilst now may not be the best time for changes in light of the cost of living crisis, employers will need time to prepare, potentially as much as five years.

"Dealing with the cost of living crisis should be our priority for now, but we must make plans for the future or else we will face a much more serious cost of living crisis for our retired population," he explained.

“A timetable to implement the changes recommended in the 2017 review of automatic enrolment needs to be set out to reduce the minimum age from 22 to 18, as well as removing the lower earnings limit.

"This will bring more people into the savings habit earlier and increase savings for the lowest paid people in society.

“A longer-term plan needs to be made - perhaps subject to positive economic indicators - which provides certainty for employers and employees about how contributions will rise in future, giving everyone time to prepare."

A Private Member’s Bill on extending automatic enrolment (AE) has also been introduced to parliament, although the government recently suggested that this is unlikely to be ready in time for the Queen's speech.

There was also some confusion as to whether a consultation on the proposed changes in this bill had already begun, prompting WPC member, Sir Desmond Swayne, to ask the panel whether there is a "lack of proper sense of urgency, about the consultation, that we thought was taking place".

In response to this, Philp emphasised: "We would be keen that the government cracked on with it and consulted on the detail of implementing the conclusions of the 2017 review."

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