Personal Pension  

Ministers clash over 8% auto-escalation policy

Ministers clash over 8% auto-escalation policy

Labour and Conservative MPs clashed yesterday (12 March) with the Liberal Democrat pensions minister on his insistence that the process of auto-escalating pension contributions must start as soon as the next parliament does.

Speaking at a Pensions Policy Institute pre-election briefing event, Steve Webb re-stated his commitment to - if elected to stay in his position - starting the process of getting those automatically enrolled into defined contribution schemes to increase their contributions towards 8 per cent before the planned review of auto-enrolment in 2018.

“From day one this should be a priority, precisely because the lead time on this is so long and such incremental increases can’t be done quickly, we need to get started right away.”

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Alongside him on election debate-style podiums was Stephen Timms, Labour MP and shadow minister for employment, who stated that if he were to become pensions minister for the third time, his party would prioritise getting auto-enrolment up and running for all employers before thinking about increasing contributions.

David Gauke, Conservative MP and financial secretary to the Treasury, responded by suggesting that while it’s something that should be looked at in due course, “a balance must be struck” between higher contributions and actual income growth.

Both ministers took time to praise Mr Webb’s tenure as pensions minister, although Mr Timms qualified this by saying he was less happy with private pensions policy than the successes with state pension reform.

He also emphasised Labour’s position that while the party would support the freedom and choice reforms, it would need to be closely monitored as the potential for another mis-selling scandal was increased by a lack of proper consultation.

Mr Timms said: “It’s important to take your time with these things, the Turner Commission’s building of consensus behind auto-enrolment policy was crucial to its success... Labour would continue this more deliberative policy approach in power.”

Mr Webb responded that it is “possible to overstate the importance of consensus making”, but pointed out that there were “no screaming rows” during the Commons debates or the panel he was part of, rejecting the need for another commission in the next parliament.

The trio were again split on the issue of streamlining regulation and removing bureaucracy by having just one regulator responsible for pensions.

Mr Webb said that he was unsure it would actually solve the problems, and while there was certainly a need for better co-ordination between departments, it was probably not the time to be getting rid of The Pensions Regulator only a few years after it was created.

However, Mr Timms backed the idea in principle, while Mr Gauke sat more on the fence, simply stating that the next government should look to reduce the amount of regulation on the sector.