Personal PensionSep 15 2016

Freedoms will boost workplace pensions: TPR

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Freedoms will boost workplace pensions: TPR

Pensions freedoms will drive people into workplace pensions and keep more people in them, a senior member of The Pensions Regulator has said.

Speaking at the FTAdviser Retirement Freedoms Forum in Harrogate, Neil Esslemont, head of industry liaison for The Pension Regulator told delegates the pension freedom and choice regime has made more people aware of their need to save for a financially healthy retirement.

Mr Esslemont said: “We believe the new regime will keep more people in pensions and drive them in, whether into an auto-enrolment scheme or another form of workplace pension.

“AE has already been driving up pensions engagement and we believe we will see an increase in opt-ins and a decrease in opt-outs.”

He said AE was crucially needed, especially given the demographic changes in the UK. He said 10 years ago, for every one retired person there were four of working age. But by 2050 this ratio will halve, to just two people of working age.

“By introducing AE now, a programme based on inertia, we are finding opt out rates are remaining low, at approximately 10 per cent.”

In response to a question from a delegate, Mr Esslemont agreed the current contribution rates - set to rise to 8 per cent minimum in 2019 from the current 1 per cent - were still relatively low.

He said: “I know these do not seem that high and people do ask if these will rise in the future, but this is a matter for government.

“There is at this time no tangible plans by government to raise the contribution rates”.

He also encouraged IFAs to get engaged with their small or micro employer clients, many of whom might not realise how much is needed to get them to comply with the legislation by their staging date.

The TPR has brought more companies within its scope just recently, revising up the number of eligible employers to 950,000 who have employees they need to auto-enrol.

As at the end of August, so far 234,589 employers had completed their declarations of compliance, covering 22.8m employees.

Mr Esslemont added: “I would urge IFAs to consider their duties to inform clients. Consider the ethical standards by which you operate and consider your professional indemnity insurance”.

simoney.kyriakou@ft.com