The enabling legislation is now in place for the 2017 auto-enrolment reforms to be put in place. We have a small number of dedicated politicians to thank for this, including Ros Altmann.

It was an honour to steer the Extension of Auto-enrolment Bill into law yesterday and this will help more people build better pensions, especially the young and lower paid. Read my blog. https://t.co/v9koJdYBil

— Ros Altmann (@rosaltmann) September 19, 2023

That the majority of people need to save harder for longer to meet their retirement expectations is beyond doubt. The AE reforms mean that more of us will be auto-enrolled and that we will generally pay more by way of contributions , because our pensionable earnings will increase. That is not the same as saying that contribution rates will increase, it just redefines the band of earnings we contribute against.

“Enabling” is not the same as “enacting”. For the extension of auto-enrolment to become real to people , payroll and employers then we need the Treasury and DWP to agree the timing for the 2017 proposals to come into force.

There is never a “good time” to increase what is effectively a voluntary tax- increase. However, as mortgage rates continue at relatively high levels as rents, especially in London, soar and as the cost of paying everyday bills continues to outstrip many people’s incomes, now would be a brave time to increase overall saving.

If we are to increase saving for the hard-pressed “Payroll enrolment” seems the way to go.

Nest Insight published the results of various savings trials that have been ongoing for some years now. I will pick out what appears to me the most relevant, the introduction by waste disposers SUEZ of an auto-enrolment savings scheme through payroll.

To put things in context, Nest’s initial sidecar savings trial had ended in good intentions but little action. Clearly having to elect to be a saver, wasn’t working.

“Opt out savings” was what SUEZ boldly implemented and the result are startling

By moving from opt-in to opt-out , SUEZ upped take up 47 times and that led to six times higher balances per saver. Multiply the two together and you get nearly 300 times much saving going on.

Of course some of this excess savings might have gone on anywhere – in people’s bank accounts, but SUEZ own research that most of the savings came about where previously no saving happened.

Nest Insight’s timing in releasing this data on the very day the “extension of auto-enrolment act” became law, is immaculate. Well done Nest Insight and well done SUEZ.

Financial resilience or excessive intervention?

Many people I know, consider auto-enrolment a payroll tax on those too vulnerable to opt-out.  I can see their point. Recent studies suggest that nearly 1/3 of those enrolled into pensions have considered opting-out but those actually opting out is still less than 10% of the eligible population of pension savers.

This is close to endorsing what SUEZ found, that more people who are opted-in stay in and less people opt-out than say they’re going to . Call this inertia if you like, but in the end, we are reminded of Mr Micawber.

Those who believe that financial resilience and mental well-being, included Charles Dickens.  But we must remember that there are many for whom auto-enrolment , even with the easy access that SUEZ’ saving plan – gives, can still lead some to swap savings for debt. Debt at the bottom of the financial hierarchy is hideously expensive.

My view is that financial resilience through the encouraged savings plan pioneered by SUEZ is the way to go. I do not consider it excessive intervention – more importantly, neither does SUEZ or its staff.

When should Government press the button?

The changes to auto-enrolment enabled by this private member’s act were supported by Government – that’s why they happened. But to be realised they need the Treasury to sanction the cost to the exchequer of extra tax-relief and the impact to people’s pockets of what many will call another savings tax.

Fiscally and politically there is never a good moment, but we should remember that auto-enrolment was introduced at a time of austerity and worked. Arguably – as we tighten our belts, we may welcome enforced prudence through an increase in our saving.

So I hope that the Government will be bold and press ahead. It could announce the changes as early as the Autumn statement in a few weeks time. Those changes could become law as soon as April 2024 and Britain’s savers could be seeing increased balances by this time next year.

But there are a lot of “ifs” and “buts” to be decided between now and the time the Government pushes the button and what is done cannot be easily undone.

More realistically, we could be in for another round of dreary consultations.

It would be impressive for a Chancellor to decrease take-home prior to a General Election but not unprecedented. We should remember that from 2024 well over a million low earners will finally get a rebate of contributions paid to them (if they save as non-taxpayers in net pay schemes).  The cashflows from those rebates will be hitting low-earner bank accounts in 2025.

Maybe the introduction of net pay  contribution relief could be introduced as a counter to the loss of take-home. Maybe the Government’s promise to implement the 2017 AE reforms by the middle of this decade, is not as fanciful as many supposed.