The politics behind extending auto-enrolment

Yesterday the TUC conference discussed widening the scope of auto-enrolment to include the self-employed, the youngest workers and those on low incomes within the financial net of auto-enrolment.

Yesterday UBER finally admitted that it controlled its workers to a degree that , amongst other things, it would be establishing a workplace pension for them.

The two events are connected of course for , without pressure from unions, UBER’s drivers would not have the rights conferred on them yesterday. Some may call the GMB’s victory a restriction of trade (including some UBER drivers) but for those of us who consider workplace pensions a benefit, UBER’s change of position is welcome as is the trade union’s part in it.

But the big questions on pension inclusion remain to be answered, not least whether the 2017 proposals have the support of the Treasury. The success of auto-enrolment came at a price to the public purse, requiring huge increases in tax relief granted to the newly enrolled , increases that were not anticipated against opt-out forecasts from the DWP that happily proved too pessimistic.

But the 2017 reforms would take levels of tax-relief to new heights. Even if it fixed the net-pay problem, HMRC’s system of tax relief rewards the wealthy and does little to encourage those previously financially excluded. Moving to a system where those on high earnings only received tax-relief at basic rates or the more draconian system where tax relief was granted on the pension not the contribution (TEE), would free up the money needed to pay for auto-enrolment (2.0) – the DWP’s formulation.

I don’t think that we have a radically redistributive Government and I don’t think that we have a Chancellor who wishes to prioritize redistribution within pensions so I remain concerned about where the money to pay for the extension of auto-enrolment is going to come from.

But the debate at the TUC conference did at least show a consensus among those on Jo Cumbo’s panel that unions do see the financial inclusion of those not fully eligible for auto-enrolment as a priority. It would be good to see pressure coming from other parts of the Labour movement to support the DWP as the current timetable for roll-out of the 2017 proposals (mid decade) could well mean that they do not appear within the lifespan of this Government (which ends in 2024).

If we are serious about extending Auto Enrolment to properly cover excluded groups like low earners, the self employed and the young, then pressure needs to be put on the Treasury to show it is willing to pay the bill.

Right now there appear to be a lot of good intentions but precious little to show for them… and that goes for sorting out the net-pay anomaly too!

I should have mentioned that today’s session at the TUC is on CDC and I hope that this point will be raised there. You can book tickets for each day here It’s free but tickets do get sold out

Check out Derek Benstead’s comment

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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5 Responses to The politics behind extending auto-enrolment

  1. Derek Benstead says:

    As well as bringing the self employed into the scope of saving for retirement, they could also be brought into the scope of accruing a pension for retirement. All it needs is NEST to be commissioned to open a CDC section. Then everyone including the self employed and employees of small employers will have a means of earning a pension, as opposed to merely putting money into an investment account.

    • DaveC says:

      Aren’t pension savings for retirement, held in a pension wrapper, the same as accruing a pension for retirement?
      Are you implying there will be two vehicles accessible for pension saving?

      What is the difference between “earning a pension”, and saving using a pension wrapper?

      • DaveC says:

        Also just to add, you can also benefit from TEE with ISA allowances to provide for an income in later life.

        Is anyone genuinely “merely putting money into an investment account” to save for retirement currently?

        I would assume at worst people have opted for an S&S ISA or LISA, if they weren’t using a pension wrapper?

  2. henry tapper says:

    I should have mentioned that today’s session at the TUC is on CDC and I hope that this point will be raised there. You can book tickets for each day here It’s free but tickets do get sold out

  3. Chris Giles says:

    Henry – The Treasury could find the money to pay for the extension of auto-enrolment if it were to eliminate tax relief on hypothetical ‘deficit reduction’ contributions to DB schemes. What’s required is a change of DWP’s ‘formulation’ that presumes DB scheme sponsors will go bust tomorrow, or the day after!

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