Gov’t: 2014 ‘not right time’ to review pension contribution
Government says it “needs to consider carefully” whether it is appropriate to raise the statutory minimum above 8 per cent.
The government said today (25 May) that 2014 is not the right time to review the statutory minimum pension contribution as individuals will not have reached the eight per cent requirement by this date.
In its response to the Work and Pensions Committee’s eighth report on automatic enrolment in workplace pensions and the National Employment Savings Trust, the government argued that it will be too early by this date to make a comprehensive assessment of the impact of auto-enrolment.
According to the government response, it would be more appropriate to review the minimum contribution once steady state has been reached and there is a sufficient body of evidence on which to base decisions.
The government agreed that it needs to consider how to encourage savings beyond the minimum eight per cent contribution level but highlighted that it “has always considered” this figure to be a starting point, and it is keen for most people and employers to contribute more.
However, the government said it “needs to consider carefully” whether it is appropriate to raise the statutory minimum above eight per cent.
It said in its response: “An increase that included a requirement for employers to increase their contributions would place an additional burden and cost on business. In addition, it would be necessary to consider whether requiring individuals to save more may encourage more people to opt out and have the unintended consequence of fewer people saving for retirement.”
This follows on from worries from the committee that eight per cent will secure a level of retirement provision which most employees would consider adequate.
The committee said that the government should conduct a review to examine how to promote saving above the eight per cent minimum; and whether it should raise the statutory minimum over the longer term. The committee wanted the review to take place by 2014, warning that if the government waits until 2017 employees miss out on higher pension contributions for a longer period.