Quilter asks govt to rethink auto-enrolment contributions

Quilter asks govt to rethink auto-enrolment contributions

Wealth manager Quilter is calling on the government to allow low earners who opt out of auto-enrolment to still receive their employer pension contributions.

Considering the impact of Covid-19 on auto-enrolment, it is likely that many lower paid workers opt out of pension schemes due to affordability and therefore miss out on employer pension contributions, the firm stated.

The numbers are unknown at this time, as the government has claimed it is unable to determine opt-out rates since the pandemic.

To counter this, Quilter is proposing that lower paid individuals who opt-out of making an employee contribution would still be able to benefit from a continuing employer contribution.

Reforming auto-enrolment to allow partial opt-ins would allow an individual to forego their personal contribution and any associated tax relief, but continue to benefit from the minimum 3 per cent employer contribution, the firm stated.

This would apply to people on a salary up to £17,500, which is broadly equivalent to 60 per cent of 2019 financial year end median earnings. The threshold should be regularly reviewed, Quilter added.

Jon Greer, head of retirement policy at Quilter, said “it is difficult for anyone on the national living wage or lower to be making a pension contribution.

"However, facilitating a partial opt in for lower earners would mean they could at least save something if they felt they had to cease contributing themselves due to affordability.”

Mr Greer noted the government is required to review the thresholds every year, with the latest review published in February.

“Every week we are seeing the impacts of Covid-19 on the economy and it makes it even more important that our savings policies are working appropriately, particularly for lower earners," he said.

“As people come under financial pressure, there is a temptation to opt-out of pension saving. A partial opt-in would offer them a halfway house.”

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