Pensions Minister Steve Webb has said he hopes the next government will bring in his idea of auto escalation as it is crucial that people can go beyond 8 per cent contributions to pensions.
Speaking at the launch of the 2014 Melbourne Mercer Global Pension Index in London, he said the government must use people’s inertia and lessons learned from auto enrolment to get people stepped up.
“I have floated an idea for the next parliament. The automatic escalation idea is that you go in at 8 per cent and unless you opt out at each successive pay rise, a bit of that money goes into your pension.”
Talking about auto enrolment, Mr Webb said he had been “hugely excited” about how it had gone, with more than 4.5m auto enrolled since launch in 2012. He said: “This is nine out of 10 staying in and far more than the sceptics, and even I, thought would happen”.
He added: “We are now staging in the small firms, phasing out contributions and starting at the minimum 1 per cent, plus 1 for the employer and employee, so will end up at 8 per cent.
Auto-enrolment and the pension reforms have been a major influence in the slight improvement in the UK’s retirement savings system, according to the Global Pension Index.
The overall ranking for the UK remained the same, year on year, with it remaining in 9th place, behind Chile. However the number of countries entering the index rose from 20 to 25 in 2014.
For the 2014 index, the UK’s pension system achieved a ‘B’ grade and a score of 67.6 out of a possible 100 in 2014, up from 65.4 in 2013. A ‘B’ grade system has a sound structure, with many good features, but has some areas for improvement, according to the index.
