Auto-enrolment for all?


The Government has leaked details of the findings of their auto-enrolment review and what its wanting to do about them.

Each of the four proposals outlined below has merit, though they won’t be achieved without protest from those who will  pay more into deferred rather than immediate pay.

The fundamental problem that these extra contributions won’t be used to pay pensions, isn’t addressed. Though these proposals add weight to arguments that the DWP should complete unfinished DWP regulations for Target Pensions (CDC).

The consensus is that any “intentions” that won’t be implemented for 7-8 years aren’t worth the leaking over a weekend. Much of what’s on offer is “spin” and social media knows it!

Meaningful change when change comes

These proposals would mean substantial changes – especially for people on certain bands of earnings. As brainy tweeps point out, the message is heavily disguised.

david robbins

Curated by David Robbins (via Twitter)


The press release doesn’t say this but it’s clear these changes won’t arrive for many years and for many, they won’t arrive at all. This certainly has caught the eye of everyone (as this blog will show).

That said, the pedestrian pace of change could be a blessing.  It may at least give space for  reforms to enable workplace plans to pay pensions!

What’s changing?

  1. Employers currently have to enrol any worker aged 22 or over, who is earning over 10,000 a year, into an approved pension scheme. The start age will now be cut to 18. Those aged between 18 and 21 will be automatically enrolled in workplace pensions . Counter-intuitively, the Government argue this is doing more for the prospects of young voters – who are struggling to make ends meet, let alone save for retirement. Soft compulsion is increasingly necessary as life expectancy grows and the length of time people spend in retirement increases.
  2. Another type of worker – the multi-jobber – will not be helped by proposed changes. The Government plans to ensure that people who are in multiple jobs, but whose combined income totals more than £10,000 – get enrolled – appear to have been shelved.
  3. Whereas, at present, the first £5,876 of their earnings is excluded from their pensionable income, the Government  will push through changes to ensure every pound is in future included in the calculation of contributions. This will make administration easier (while ramping up contributions to employers and staff).
  4. Finally, the Government is set to trial ways to include the self-employed in workplace pensions. Writing in the Guardian, David Gauke said that this would begin “with the launch of targeted interventions, including through the tax return process” . This stops way short of what pensions ministers Harrington and Opperman have promised and arguably breaks a manifesto commitment. However, in the light of the battering the Treasury has already taken on Self-employed taxes, this is all that was expected. Well done to Citywire/AJ Bell  for this report.

When’s it changing?

Together these measures will see an additional £3.8bn in annual contributions when fully rolled out. But “when” is the operative word!

The Government intend these changes to come into effect in the middle part of the next decade (let’s say 2025). So quake in your trainers if you are an eleven year old!

I’m with Steve Webb who commented on twitter

“Lots of good ideas in auto-enrolment review – but implemented in ‘mid 2020s’ – seriously?”

The sad truth is there is no legislative timetable for reform before 2019 and frankly we are unlikely to see reforms of this nature legislated for in this parliament. Assuming the next election is in 2020, then these policies will be reviewed (as auto-enrolment was in 2010) with a view to implementation within that parliamentary term. 2025 is a realistic back-stop for David Gauke.

But this auto-enrolment review was baked in to the system well in advance of 2017. The planning process seems wrong if a review is commissioned eight years before it can bring change. Government can blame BREXIT for so much, but BREXIT does not put on hold the reasonable aspirations of a generation of youngsters, multi-jobbers, low-earners and the self-employed.

What should be changing -but isn’t?

As a point of order Mr Gauke, your department’s claim that

“at present, employers must contribute 1.0% of an employee’s qualifying earnings while employees pay in 0.8% of earnings, although they enjoy the benefit of tax relief on contributions”

– is untrue.

We estimate that over 300,000 low-earners are not getting the benefit of tax relief because they pay no tax and are in the wrong kind of scheme. There is no mention of addressing the injustice for those auto-enrolled into net-pay schemes who would have got this incentive if they’d been given relief at source.

38% are under-saving ; how will that change?

The DWP estimate that nearly 4 in 10 of us are chronic under-savers.

“The review estimates there are still around 12 million individuals under-saving for their retirement, representing 38% of the working age population. Of this 12 million, some 6 million are ‘mild under-savers’.” – Jo Cumbo (twitter)

For this to change, AE contribution rates must rise above 8% of capped earnings at some point. The reports so far are silent on this matter.

It is an unpalatable truth than no matter how far we stretch the width, we have to address the quality. Whether through the AE rate or by encouraging additional voluntary contributions, contributions per member must go up and go up before it’s too late!

While these reports help the young, they leave those earning below £10,000 pa, excluded from workplace pensions.

 “For an entire generation of people, workplace pension saving is the new normal.
And my mission now is to make sure the next generation of younger workers have the same opportunities.
We are committed to enabling more people to save while they are working, so that they can enjoy greater financial security when they retire.
When the modern state pension was introduced in 1948, a 65-year-old could expect to spend 13.5 years receiving the state payment – 23% of their adult life.

In 2017 a 65-year-old can now expect to live for another 22.8 years, or 33.6% of their adult life”

The numbers saving into a workplace pension has grown by more than 9 million, with many of them under the age of 30. However, around 12 million people are judged to be under-saving for their retirement.
Time is not on their side.
I would like to believe that the proposed implementation timetable was to give space for workplace pension reform, but I doubt it. I fear that the only reform on the DWP’s mind right now , is their vanity project , the DWP Pensions Dashboard.We can only conclude that while inclusive policies matter – Politics matter more.

Policies matter, but Politics matters more?


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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