PLSA AC 2020: AE and state pension highlighted as crucial for young people and women

Industry experts have emphasised the importance of the state pension and auto enrolment (AE) in supporting younger savers and women in retirement, amid growing demographic divergence.

Speaking at the PLSA Annual Conference 2020, LCP partner and former Pensions Minister, Steve Webb, said that the government had got “pretty wimpish” around AE policies.

Webb stressed that despite having a “very sensible incremental report”, “modest” changes, such as extending AE to 18 year olds and applying the percentage to full earnings, were not likely to be made until 2025 “even before Covid”, and now seem to be on hold.

He stated: “It’s a miracle we kept the measure of AE going at all in the crisis, that’s a real win. The fact that the furlough scheme gave money to employers towards AE is a real win, so that’s great, it’s got cemented."

However, Webb stressed that this will “come to a halt”, which will see a lot of people with modest DC pots forced to work longer as they cannot afford to retire.

Adding to this, Resolution Foundation chief executive, Torsten Bell, warned that the country is also ageing significantly, with demographic divergence across the country “stretching the age gaps”.

Torsten highlighted this shift in demographics as a “dominant” feature of British politics, emphasising that age is a "defining" feature in how people vote.

He warned: “For a pensions industry which is trying to wrestle with providing for those existing older pensioners today while encouraging the younger generation into saving, ignoring these divides is a dangerous game.

“They are affecting our politics, how places feel, and they will affect our economics."

However, Webb clarified that whilst the message of a 'golden generation' reaching retirement can make it tempting to “switch the taps off”, the state pension will be “crucial” for young people in future.

He explained: “Young people desperately need when they retire a ‘damn good state pension’, because if they worked outside the public sector they aren’t going to get much else.

“One of the despairing features of Covid is that any progress on expanding AE has come to a juddering halt.

“Generations of people really really care about the state pension so I think it’s highly risky for anyone to suggest that now is the time to turn the taps off.

“We really really need a good state pension, especially for women, because we talk about gender equality in wages and so on, but I say to you, the bit of the pensions system that does the most for women by a country mile is the state pension.”

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