Govt refuses to commit to auto-enrolment changes

Govt refuses to commit to auto-enrolment changes

The government has declined to speed up the announced changes to auto-enrolment, despite several pension experts demanding a faster approach.

In a written answer to Parliament, Guy Opperman (pictured), minister for pensions and financial inclusion, said the government won’t force the pace of change in auto-enrolment, and wants to understand properly the impact of the 2018 and 2019 increases in minimum contribution rates, before committing to a timetable.

Changes the government plans to table by the mid-2020s include to start calculating contributions from the first pound earned, as announced in the 2017 auto-enrolment review.

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In December, the Department for Work and Pensions (DWP) announced that the minimum threshold for auto-enrolment would remain at £10,000 for 2019/20, which sparked criticism.

But Mr Opperman said the decision "continues to strike a balance between affordability for employers and individuals," while delivering on the government’s "policy objective of continuing to give low to median earners, who are most able to save, the opportunity to do so".

He said: "This also provides a level of stability, with the second phased increase in contributions due to take place at the start of the 2019/20 tax year.

"Lowering the trigger could result in diverting income away from the day-to-day needs of the lowest earners and impact significantly on their living standards.

"For those low earners who are in a position to contribute, however, the option remains to opt-in to saving, and if they earn above the lower earnings limit they will also receive employer contributions."

Minimum contribution rates under auto-enrolment will increase from 5 to 8 per cent in April, with the employee paying 5 per cent.

The minister said auto-enrolment was designed specifically to help groups who "historically were poorly served or excluded from workplace pension saving, such as women and lower earners".

In 2012, 60 per cent of eligible women in the private sector did not have a workplace pension, he noted.

As of 2017, this had fallen to 20 per cent and the participation rate for women in the private sector is now near equal to men, he concluded.