Pension experts have called on the government to implement changes to auto-enrolment in the Pensions Bill planned for next year.
Darren Philp, head of policy at master trust Smart Pension, told FTAdviser the government should use the bill to press ahead with the removal of band earnings and a lower qualification age, as had been announced last year.
This would "keep up the momentum in terms of getting more people saving more for retirement," he noted.
Last December, the Department for Work and Pensions (DWP) published its long awaited auto-enrolment review, which announced a series of measures the government was looking to implement. This included lowering the age of workers auto-enrolled into workplace pension schemes from 22 to 18 years and calculating contributions from the first pound earned, instead of the current £10,000 lower earnings threshold.
However, these were only expected to be introduced in the mid-2020s.
Sir Steve Webb, director of policy at Royal London and former pensions minister, said he believes the bill will deliver some changes in this area.
However, he cautioned even once the legislation has been passed, it could still be several years before the Treasury gives the go-ahead for the changes to be implemented.
Besides auto-enrolment, next year’s bill – promised by pensions minister Guy Opperman in October – is also expected to include the regulation of defined benefit (DB) consolidators, new powers for The Pensions Regulator following high-profile cases such as BHS, measures around the pensions dashboard and a legal framework for collective defined contribution (CDC) pensions, Sir Steve added.
On CDCs, Smart Pension’s Mr Philp said introducing legislation on this type of scheme in the UK would be "a huge achievement".
The government launched a consultation on CDCs in November, as Royal Mail is set to create the first of these pension schemes in the UK.
CDC pension funds differ from defined contribution (DC) pensions in that they do not produce individual pension pots. Instead they invest people's savings in a large collective pot which provides an income in retirement to its members.
They also differ from DB plans because do not guarantee a particular income in retirement and instead have a target amount they pay out based on a long-term, mixed-risk investment plan.
The Pension Schemes Act 2015, passed by the coalition government, had included a provision for the creation of CDC schemes but the secondary legislation to create them was never introduced.
Mr Philp said: "Over time, I think this could allow further innovations in sharing risks and, while the current consultation is relatively narrow, it sets the tone for the future in terms of moving away from thinking solely in terms of DB and DC."
Pete Glancy, head of policy at Scottish Widows, said CDC would have an indirect impact on the pensions landscape.
He said: "It’s not obvious to me that the nature of the labour market in modern Britain easily lends itself to CDC, beyond a very small number of large employers with certain characteristics such as Royal Mail, who have agreed to introduce this type of arrangement.
"One exception could be in a future where employees are given the opportunity to select their own pension scheme, which could include CDCs amongst a menu of options available."
However, he added "lifting the bonnet on some of the building blocks such as smoothing and spreading of risk or the illiquidity premium could ignite very fruitful discussions in relation to improving defined contribution pensions generally".
Meanwhile, Smart Pension’s Mr Philp would also like to see the government tackle the "small pots issue" of micro pots, worth less than £100.
He said: "It makes no sense for individuals to have many micro pots and, while the dashboard will help people aggregate and keep track, I think we need to either have some auto consolidation of micro pots using the infrastructure created by the dashboard, or simply allow people to cash these out."
He added: "These are uneconomic for providers to service and it does the member no favours to have pots of this size floating around."
maria.espadinha@ft.com
