Former pensions minister Sir Steve Webb has said the big challenge for his successors is addressing the level of contributions to auto-enrolment pension schemes.
Speaking at the Personal Finance Society’s Festival of Financial Planning in Birmingham yesterday (7 November), the former Lib Dem minister said the 8 per cent level which contributions will reach in 2019 should be a “big flashing number” for the pensions minister.
Sir Steve said: “The defined benefit tide is going out but the defined contribution cavalry has not come over the hill yet.
“What I am not in favour of its older people in the workforce who don’t want to be there, who hate getting up in the morning and whose employers want to get rid of them but who are stuck there because they cannot afford to retire.
“If we don’t start getting serious about this we will see a whole decade of inactivity.
“We have got to go beyond 8 per cent and use all the behavioural insights we have seen before.”
Sir Steve cited the 17-year period between when auto-enrolment was first proposed to when its roll-out will be complete in 2019 as an example of the delays which these policies can be hit by.
His concerns were echoed by Baroness Altmann, who also addressed the PFS conference.
She said she was concerned about the lack of legislative activity because of Britain’s departure from the European Union, explaining her eagerness to attach amendments to the recent Financial Guidance and Claims Bill which introduces the replacement body to the Money Advice Service.
Baroness Altmann said: “Unfortunately the fear is the Brexit challenges will prevent a be a major stumbling block to getting any meaningful legislation through Parliament.
“Which is why a lot of us are so exercised to get anything into the Financial Guidance Bill, because there is no other bill on the horizon.”
Sir Steve also expressed concern that the “inexorable switch” from pensions to Isas will continue to be the trend.
He said: “The Treasury hates pensions. They love Isas because they invented them. They love them so much they invent a new one every year.
“As far as the government is concerned, if you save in one or you save in the other, who cares?”
Both Baroness Altmann and Sir Steve were in agreement that the role of pensions minister was in need of reform.
The former recommended a savings minister in the Treasury with a minister responsible for the state pension in the Department of Work and Pensions while the latter advocated a single pensions minister in the Treasury.