Pensions minister Baroness Ros Altmann has said if the pensions industry is working correctly then compulsion in terms of auto-escalation for those who are auto-enrolled will not be needed.
In an interview with FTAdviser, she said: “One of the big themes for me is making sure that the industry treats customers well.”
She added that this is a “whole new mindset” for the industry because historically they have not very often engaged with customers.
“We are now handing them millions of new customers with auto-enrolment and they need to look after those customers and engage them, and hopefully then those customers themselves will want to do more.
Baroness Altmann said that helping people to understand pensions is a big challenge for 2016.
She said that, in her view it was much too early to talk about compulsion and auto-escalation, in the sense that the industry has not even reached the end of the roll-out of auto-enrolment.
Baroness Altmann added if people have a good experience, if the industry looks after them and then they start realising that this auto-enrolment minimum level isn’t going to be enough, then individuals themselves are more likely to want to increase their pension contributions.
She said: “Encouraging auto-escalation makes absolute sense to me but if the industry does not give people a good experience in auto-enrolment, however much you increase the levels that you want to put in under auto-enrolment, they can opt out so you won’t get anywhere.
“The industry’s challenge is to engage customers - not easy but I believe it can be done.”
Henry Tapper, founder of auto-enrolment service Pensions PlayPen and director at pensions consultancy First Actuarial, told FTAdviser that people should be free to save as they like.
He said: “The government should apply reasonable force to make sure that people get value for money on their savings.
“But beyond setting the minimum contribution levels for auto-enrolment, it shouldn’t be the government’s job to enforce voluntary saving.
“We have a compulsory state pension system and the government has the capacity to adjust our national insurance contribution rates to fund for more or less state support. That is as much state intervention as we need.”
In September last year, Jamie Jenkins, head of workplace strategy at Standard Life, argued that while in many ways it would be easier, the UK should avoid pension contribution compulsion.
He said: “I think this would be viewed as a failure of the system, a tax rather than a nudge.”
ruth.gillbe@ft.com