The government will not introduce higher workplace pension contribution rates beyond the planned increases, despite warnings from industry experts current rates will not sustain people in retirement.
A report by the Department for Work and Pensions into auto-enrolment, due to be published in December, will not be making any changes to minimum contribution rates, the Pensions Policy Institute director has revealed.
Speaking at the Pensions and Lifetime Savings Association (PLSA) conference in Manchester yesterday (18 October) Chris Curry, who is also chair of one of the external advisory groups of the DWP's review, said he is working on “setting out the evidence base from which to make future decisions around contribution rates”.
The Department for Work and Pensions announced last year a review of auto-enrolment, five years after its launch.
From April 2018 the minimum total auto-enrolment contribution - from both employer and employee together - will increase to 5 per cent. One year later, it will rise to 8 per cent.
However, several industry experts have been asking for a further hike in the minimum rate, as savers might not have enough money to retire with the current contributions.
Troy Clutterbuck, interim chief executive of Now: Pensions, said at the conference that the government should be working on a roadmap that would lead to an increase to a 12 per cent minimum contribution.
The PLSA itself is advocating for the same value.
Mr Curry argued that changes cannot be decided before next years’ hikes.
He said: “We don’t know is how individuals are going to react when we see increases in the contribution rates.
“It is important we have that evidence base of what is happening before we decide on what we want to do in the longer term.”
He said, however, that there might not even be a lot of changes in savers behaviours, as the change is coming in April.
The new rate will be introduced “at the same time as a number of other things change, such as national minimum living wage, and personal taxation - even though we don’t know what is coming out of the budget,” he added.
According to Mr Curry, there is still a lot to do on auto-enrolment, as it hasn’t been fully implemented as it is currently set out.
He said: “There is a lot of work for us to carry on doing. We want to set out a direction of travel and where we want the system will evolve in the future, but it is also clear that this is not the end of the process for auto-enrolment.
“Auto-enrolment is at the start of a journey which will take long time before it is finished, if it is ever finished.”
The auto-enrolment review will also include possible changes in coverage, with the self-employed workers being one of the main focus of attention.
Pensions minister Guy Opperman recently confessed “there is no simple solution” for including self-employed people in auto-enrolment.
maria.espadinha@ft.com
