Govt urged to publish AE reforms and review timetable

The government has been urged to publish a timetable for the next automatic enrolment (AE) review and reforms, after research from the Association of Consulting Actuaries (ACA) revealed "very strong" employer support for change.

In particular, the survey found that 63 per cent of employers thought more flexibility would lead to higher savings, whilst 88 per cent supported extending AE to over 18s, and a further 84 per cent supported lowering the threshold to the first £1 of earnings.

The research has also revealed that the number of employees leaving the scheme has more than doubled amid the pandemic, increasing from 11 per cent in 2019 to 26 per cent in 2020.

In addition to this, around 15 per cent of employees were found to be ineligible for AE, alongside the increasing number of 'gig workers', which 59 per cent of the employers surveyed now work with.

The report also found that total contributions remained at around 9-10 per cent of earnings, which the ACA emphasised is not enough to provide a comfortable retirement.

However, over half (52 per cent) of employers stated that they support higher minimum AE contributions, and more than two thirds (68 per cent) stated that they could support total minimum AE contributions of 10 per cent of earnings from April 2022.

ACA chair, Patrick Bloomfield, emphasised that whilst the government has resisted calls to include AE reforms in the Pension Schemes Bill, the latest findings show strong support from employers, to add to support for reforms from MPs and Lords.

He stated: “We call on the government to publish a timetable for its next AE review and implementing the recommendations of the last AE review.

“It’s understandable that more people have opted out of pensions following Covid.

"Our challenge is that we weren’t saving enough for a decent retirement in the first place. This will leave more people facing a miserable retirement.

“Our society needs the government to bring in higher minimum savings rates, which apply to more people. It will take time to phase in, so we need to start planning now, as part of the Government’s “build back better” response to Covid.

“Continuing to duck the issue of adequate pensions will come home to roost when people can’t afford to retire.”

Adding to this, ACA defined contribution committee chair, Tessa Page, emphasised that the government must put "flesh on the bones" of how it intends to implement AE reforms and whether plans to proceed with increases in minimum contributions.

She continued: "The calls for a more flexible workplace savings vehicle identified in our survey also require government legislative action, supported by innovation from the industry.

“Employers too need to do more to encourage employees to stick with pension saving, make the most of their workplace schemes, and, ideally, offer more in the shape of guidance so the value of long-term savings is appreciated better – this will support employers too in managing the challenges of an ageing workforce.

“For those who have opted out of saving during the pandemic, employers can help to get them back on track through targeted communications and re-enrolment.

“And employees must relocate the savings habit over the ‘spend now’ habit and look to plan ahead.

“The self-employed and those working for any length of time in the ‘gig economy’ – with no workplace pension are a particular concern, and it would be great to see government policy to better support these groups.

“Aside from a windfall, there really are no short cuts to ensuring greater peace of mind for life after work.”

The research is the third in a serious of reports outlining the findings of the ACA’s 2020 Pension Trends survey, with previous reports having revealed "huge support" for pension tax reforms, and division over the plans for future pension dashboards.

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