He says: “I am keen to see the removal of qualifying earnings from the calculation, so that contributions are on every pound of earnings, as well as the removal of the AE trigger that is currently set at £10,000. This would result in a greater proportion of people saving through AE and would improve outcomes for all savers, but particularly part-time workers and the low paid – the majority of whom are women.”
Sally Thomson, policy and positioning manager at Scottish Widows, is another advocate of removing the £10,000 trigger, together with ditching both the lower and upper age restrictions of 22 and state pension age respectively.
Furthermore, she adds that minimum contributions should increase to 12 per cent: “I hope the rules that govern AE are simplified. Those currently excluded, who do not benefit fully, are able to receive a better deal going forward.”
With speculation on the government’s potential moves starting to ramp up, this year’s Money Management AE survey provides an opportunity to examine the state of play on the eve of potentially significant changes.
Cost delay
Details of the basic information about each individual scheme can be found in Table 1. The number of respondents – eight – is the same as last year. Between them, they account for three-quarters of the market.
Cost has proved a prominent theme in the financial sector in recent years, and will have been a key consideration for employers when choosing an AE provider. Under AE rules, the maximum annual charge any scheme can levy is 0.75 per cent, with only one provider, Aviva, charging the maximum level.
Consumer groups clamouring for the maximum charge to be reduced have recently seen their hopes dashed. In a written statement to Parliament on 16 November, pensions minister Guy Opperman said: “We do not feel that now is the right time to change the level or scope of the cap.”
It will be more than two years before charges are placed under further examination, with the minister confirming the next review would arrive in 2020.
Tom Selby, senior analyst at AJ Bell, says that if the government were to lower the cap at some point, then Nest’s charge of 0.5 per cent could provide the guideline. He adds that change is far from off the table despite the recent announcement: “It would certainly be no surprise to see the government push for a 0.5 per cent charge cap ahead of the scheduled 2022 general election to show that it remains on the side of hard-working savers.”
