The 2017 government review of auto-enrolment is unlikely to lead to major policy change, the chief executive of Now: Pensions has said.
However, Morten Nilsson said he hopes it will set the “direction of travel”, particularly on issues of adequacy and coverage.
In particular, he said he hoped the net pay versus relief at source issue would be resolved..
“As we look ahead to 2017, at the forefront of my mind is the 2017 auto-enrolment review. While I don’t anticipate any firm decisions to arise as a result of the review, I do hope it’s seen as an opportunity to set the direction of travel for the policy,” Mr Nilsson said.
“It’s a sobering thought that while seven million workers have been auto-enrolled a further six million workers have missed out.”
He said a recent report from the Pensions Policy Institute (PPI) had revealed 3.3 million of the people excluded from auto-enrolment had been excluded because they earned less than £10,000 a year.
It also found more than three quarters of employees earning less than the auto-enrolment trigger were women.
“Lowering or removing the auto-enrolment trigger would significantly increase the number of people saving through auto-enrolment and almost certainly help improve outcomes for women whose occupational pension savings are already well below men’s,” he said.
“But, lowering or removing the trigger would exacerbate the anomaly that currently exists between net pay and relief at source schemes.”
He claimed that in the 2015 to 2016 tax year, Now: Pensions was the only net pay scheme to commit to topping up the pension pots of members whose total earnings were less than the nil rate tax band and were missing out on the uplift they would have received in a relief at source scheme.
“Over time the amount savers are missing out on will increase as the nil rate income tax band rises to £12,500 in 2020 – a commitment recently reconfirmed by the chancellor Philip Hammond.
“Regardless of which scheme savers are paying into, they should receive the same tax treatment so we’re continuing to lobby HM Treasury, HMRC and DWP to resolve this issue.”
He said a debate was also needed on “qualifying” or “banded” earnings.
“Auto-enrolment legislation specifies that only earnings between £5,824 a year and £43,000 a year have to be included in the auto-enrolment calculation,” he said.
“This disadvantages all workers but particularly part-time and the low paid. For example, somebody earning £10,000 per annum will not benefit from the headline 8 per cent contribution but in fact only 3.4 per cent because over half the earnings are excluded."
He said the position got a bit better at higher earnings levels, but pointed out that even somebody earning £40,000 a year would receive just 6.9 per cent, not the headline 8 per cent..
james.fernyhough@ft.com
