Bell
Pensions minister Torsten Bell has confirmed auto-enrolment (AE) thresholds will be maintained at the current levels for 2025/26, following the statutory annual review of the AE thresholds.
Bell confirmed the AE earnings trigger will remain at £10,000, while the lower earnings limit of the qualifying earnings band will remain at £6,240 and the upper earnings limit will remain at £50,270.
The Department for Work and Pensions (DWP) said under these thresholds, pension contributions for 2025/26 are estimated to be £89.8bn.
Follow the annual review, Bell said: “It is important that AE works for individuals, supporting those for whom it makes economic sense to save towards their pensions whilst also ensuring affordability for employers and taxpayers.”
Professional Pensions reported the news and follow up with pension commentators who largely complain that not enough is being done to nudge low paid earners into higher payments.
It’s reported as Bell’s move, it has been obvious it’s coming for some time and Bell is merely ratifying a Government plan. Bell has better things to focus on.
I for one am comfortable that Torsten Bell is focussing on the right thing. I am a small employer and contribute at the minimum level, we allow members of our AE plan who work for us to swap income for employer contributions and we invest the savings to us into their (including my) pension savings scheme.
What the Pensions Minister should be doing is focussing on how we can turn savings into pensions. Tomorrow I will be travelling from London to Melton Mowbray to eat pies with John Hamilton and discuss with the East Midlands PLSA how best we can go about restoring a pension culture in the UK.
My kind of pie chart
I do not believe that minimal AE contributions on their own will create a pension culture, we need sponsoring employers and individuals to take retirement more seriously and we need to encourage them to do so by offering better options when they come to retirement than we do today.
I am delighted that the PLSA (through its CEO) will be present to listen to what John has to say. I am pleased that the comments on this blog are turning to the issue that has beset private pensions, that we haven’t figured a way out to keep people invested till the flow of retirement income is no longer needed.
DC can provide VFM, we are seeing some Master Trusts forging ahead. Peoples, Nest, L&G and Lifesight are already past the £25bn asset target set by the DWP and HMT. There is the will amongst some of those trying to get there to achieve success. They will need to take investment seriously as they will not get to £25bn unless they can stay the right side of the VFM measure. They will not be able to survive but will be eaten by those who do. We know who are doing well and who aren’t. Sponsors aren’t stupid, members aren’t stupid and Government isn’t stupid.
But it’s not just investment performance that counts, it is the ambition for pension schemes to provide pensions. We are seeing in Australia a wish to turn pots to pension and we don’t need to let things deteriorate as they have with Supers in the UK.
The task for Torsten Bell, who I hope will read this, is to make sure that people like me, 63 and 4 years away from State Pension Age, have a way of turning my pot to pension.
Individuals can choose to pay more into retirement saving and they could and should be lobbying employers to let them do so with flexi pension systems such as those AgeWage offers and most large employers. They should be lobbying for more pension contributions which are looking increasingly tax and NI efficient.
We should not be requiring higher rates of pension contributions for auto-enrolment. There are bigger priorities for this Government, inside and outside of pension rules.