Hal Austin: Auto-enrolment delay adds to savings mess
Delay in the introduction of auto-enrolment begs the question of what reasons there are to justify a further late start for the people who need to save the most.
Not since Nigel Lawson introduced personal pensions under the 1983 Thatcher government and encouraged many of those in the public sector to cash in their occupational pensions to go solo, have we seen such a mess being made of long-term savings.
The mad rush to sell personal pensions led to a £11bn mis-selling black hole, which had an incredibly awful effect on the industry.
If we were to fast-forward to the New Labour years, even if we were to ignore the swap-the-pensions-minister game played by Tony Blair and Gordon Brown, the announcement last week by the Coalition Government that it was postponing the long-awaited auto-enrolment into Nest for low and moderately-paid workers employed by small firms until May 2015, came as a shock to the system.
In one moment, an ill-thought out decision, meant for all the right reasons to ease bureaucratic pressures on small businesspeople, the unintended consequence of the decision is now ricocheting through the land.
The repercussion, which should have been clear to the pension minister Steve Webb and his advisers, is that the decision will only undermine the decade-long drive to turn Britain in to a savings society.
Not since Nigel Lawson introduced personal pensions under the 1983 Thatcher government have we seen such a mess made of long-term savings
For all the reasons we already know, including the demographic time-bomb, our poor savings record, pressure on employers, the eurozone crisis, and more than anything, the inability of the state to provide for the pensioner poor, the department for work and pensions took this decision without apparent consideration of the outcome.
For years, the country has been discussing the pensions crisis, importing ideas from as far as New Zealand and Chile, and just when we though we were emerging from the fog, now this.
Already, there has been a lot of discussion about whether or not the meagre contributions stipulated by Nest, could provide a reasonable retirement income for its target market.
Equally, with other demands on the wages of the young, including massive student debt, struggling to get on the housing ladder and the uncertainty of steady long-term employment, now is as good a time to start long-term savings as any.
But, the announcement itself coming out of the DWP, putting the date back for small businesses from May 2014 to May 2015, was inadequate to the point of being dismissive.
No proper explanation came, apart from a rhetorical claim to be still supportive of auto-enrolment. The press release quotes the minister as saying in part: “We recognise that small businesses are operating in tough economic times so we are softening the timetable for implementation to give them some additional breathing space.
“This is a sensible step that ensures long-term pension issues are addressed while meeting the short and medium-term needs of small business.