Work and pensions select committee chair Frank Field has said he is "disappointed" the government review of the auto-enrolment system will not consider raising contribution rates.
His comments came in response to the government's terms of reference to be used by the review's external advisory group, released yesterday (8 February) along with initial questions for those wishing to make a submission.
While the list included a number of questions on contributions, the Department for Work and Pensions said: "We do not expect to make policy recommendations in this area during 2017."
Mr Field said he was pleased the government had "taken so much note of our [the committee's] work", but said its decision to rule out raising contribution rates beyond 8 per cent was a "missed opportunity".
"I am disappointed ... that increasing contribution rates will not be part of the review," he said.
"Our report found that the statutory combined contribution rates of 8 per cent of qualifying earnings will not be enough to provide most people with an adequate pension and that DWP’s own analysis revealed that 11.9 million people would be under-saving for their retirement."
He concluded: "This is a missed opportunity to help millions of workers save properly for their retirement."
In a letter to Mr Field dated 8 February, parliamentary under secretary of state at the Department for Work and Pensions, Richard Harrington, wrote: “I have noted with interest your committee’s report on automatic enrolment following your inquiry last year, and welcome your positive assessment of the success of the programme to date.
“As you know, I am very keen to build on this success and the review is an opportunity to ensure that the policy continues to meet its original objective of addressing under-saving in retirement.”
He went on to say the review would look at the extending the coverage of auto-enrolment to include groups such as the self-employed.
Mr Harrington said it would also look at the earnings threshold, as well as examining ways to get members more engaged. He did not mention contribution rates.
The committee's report on auto-enrolment recommended the government increase contributions "beyond the statutory minimum of 8 per cent of qualifying earnings, including mandatory increases in employee and employer contribution rates and means of encouraging greater voluntary contributions".
It quoted Pension Policy Institute figures that found individuals would need contribution rates of between 11 per cent and 14 per cent contribution rates in order to have "a 75 per cent chance of achieving their target replacement income, which would typically be two-thirds of pre-retirement income".
Previous pensions minister Baroness Altmann has also previously said contribution rates need to be increased, saying current levels are inadequate for providing a decent pension.
It also found that millions of working people were excluded from auto-enrolment because they did not meet the lower pay threshold. Women, ethnic minorities and disabled people were particularly poorly served.
It also recommended measures to automatically enroll self-employed workers.
james.fernyhough@ft.com
