In response to Alison Steed’s column on state pensions (FA, 10 December), I am glad to see someone has commented on something I have been talking about for years.
However, Ms Steed has missed an important point. Where she refers to people opting out of auto-enrolment: “Chosing not to have your employer pay into a pension for you is equivalent to volunteering for a pay cut”, I do not agree.
Many opt out because they already have a perfectly good personal pension which is not recognised by the AE rules (for example, single premiums and salary sacrifice). These plans often have far better fund choices (admittedly at a higher cost than AE). Employers often pay more into these than under current AE rules. But one of the killer reasons is that the employer does not have all the bureaucratic hoopla associated with AE.
Also, it does not get mentioned that AE is an abrogation of the state’s duty. Employers are not benefits agencies. If state pensions become less affordable, then taxes may have to rise. Many already believe that they fund their state pension via NI. AE is just a payroll tax, and for larger firms this will be further compounded by the apprentice levy.
The results will no doubt be slower wage growth and possibly higher unemployment than otherwise might have been the case. One might then ask what is better – a job with no private pension, or no job and no private pension?
But I guess it does not serve the government’s purpose to highlight these points.
Harry Katz
Consultant,
HA7 Consulting,
Stanmore,
Middlesex
