Henry Tapper, founder of auto-enrolment service Pensions PlayPen and director at pensions consultancy First Actuarial, has questioned the government’s auto-enrolment tactics.
Speaking to FTAdviser about the ‘Review of the automatic enrolment earnings trigger and qualifying earnings band for 2016 to 2017’ published today (15 December), Mr Tapper said he knows the “continual references to the tax consultation and the link between auto-enrolment is increasingly obvious”.
“The government can’t afford EET on automatic enrolment at current levels. The document makes a link between the tax consultation and automatic enrolment,” he added.
The government pushed back an announcement on the pensions tax relief paper until the March 2016 Budget.
The paper considered whether pension taxation should mirror that of Isas.
Additionally, delays on auto-enrolment were announced as part of the Autumn Statement, meaning that increases to the auto-enrolment minimum contribution rate have been pushed back by six months to April.
The document released today (15 December) shows the government is planning to increase the amount paid into auto-enrolment overall.
The £10,000 automatic enrolment trigger will be kept. However, the government is widening the bands, pushing the upper threshold to increase to £43,000 from last year’s £42,385.
Trade Union Congress general secretary Frances O’Grady said of the trigger freeze: “By freezing the earnings trigger for automatic enrolment, the government has missed the opportunity to bring millions of low paid and part-time workers into the pensions system.
“The government’s own figures show that women make up just 38 per cent of those eligible for auto-enrolment under its plans, leaving millions missing out on employer contributions to workplace schemes.
“We know from the success of automatic enrolment that relying on these groups to voluntarily opt-in to pension saving is a very ineffective way of reaching more workers.
“Without action, we risk leaving lower earners without the vital benefits provided by regular pension savings.”
Mr Tapper added that the government will keep the ‘net pay problem’, which is the fact that people earning less than £10,000 will not get tax relief if they go into auto-enrolment.
“All those people under £10,000 at the moment are being mis-sold by the government.
“I’m pleased to see a gradual increase in bands,”he added. “But I’m worried there will be more and more people in auto-enrolment who won’t be getting tax relief unless we can sort out the net pay problem.”
He added of this year’s changes: “The reason they are not taking a more radical position than this is because everything is going to change next year [pensions tax relief].
ruth.gillbe@ft.com