Pensions Minister Steve Webb provided an update on direction of pension reform at a Jelf Employee Benefits seminar at London Zoo yesterday, stressing his desire to create a clear and stable pension framework.

Automatic enrolment is central to the Government’s plans around achieving higher rates of private saving, and will be phased in starting with the largest firms from next year.

Ensuring employees stay in schemes once they have been enrolled is key to the success of the initiative, and Webb said the Government’s research shows that clearly communicating the optional nature of auto-enrolment is important.

Employees may feel “hostile and disempowered” by being told they are having earnings directed to a pension scheme they did not willingly sign up for, Webb said.

“We want [people] to feel positive and in control. So the correspondence we have with people about auto-enrolment is absolutely up front about the fact they don’t have to do this. Rather than bury it at the bottom of a 48 page form you put it in the first paragraph.”

The Minister said work currently underway on state pension reform is an important part of reinvigorating private pensions. The current system is poorly understood and means testing can act as a disincentive to private saving, Webb said.

“When people decide whether to stay enrolled into workplace pensions … they need to be confident that it pays them to save. At the moment they can’t be confident because if we do nothing the basic pension is £102, the means test is £137, so the first £35 or so you save, we take off you.

“It’s not surprising that low income people think ‘what’s the point in saving?’ So, we want to do it better.”

The seminar was held to explain and discuss the current main drivers of change in pension legislation including the introduction of automatic enrolment.

Attendees were asked to vote on questions about their understanding of and preparedness for upcoming changes to pension arrangements. The responses showed that 92.1% believed that automatic enrolment will be good for employees, while 49.4% felt it will be good for the employer.

Just 29.5% of employers were aware of their staging date for automatic enrolment, and prepared for the change. However, 95% felt they would be ready by the time they were covered by the changes.

“I am pleased that many employers agree with us that this is a positive thing for their staff.

“We are also committed to help employers through this transition. That’s why our Pensions Bill includes measures that will reduce the burden on businesses,” Webb said in a statement.

Commenting on the results of the votes, head of benefits strategy for Jelf, Steve Herbert, said employers need help in understanding the pensions changes and the implications for them.

“Although most told us they feel confident that they’ll be ready when the time comes, we know they will need help in getting there. We’re seeing employers trying to get things in place now, and they see how much there is to do, we urge employers to start getting prepared earlier rather than later,” Herbert said.

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