Managing Director Pension Playpen
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Auto-Enrolment - what the Government want to do next

2nd Jun 2016
Managing Director Pension Playpen
Columnist
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The Government has convinced itself that it has a success story on its hands with auto-enrolment. The emphasis is now on capitalising on what has been acheived so far and minimising the risks going forward. 

I have been lucky enough to meet with the Pension Minister and with key civil servants both in the DWP and its Pensions Regulator. 

The principal concerns within Government are over operational issues and the risk of a provider failure.

The risk of operational failure is being addressed by the DWP through its "Workie" awareness campaign and through a reallocation of resource within the Pensions Regulator towards Charles Counsell's auto-enrolment division. Though the DWP has cut tPR's budget, the AE division is seeing an increase in its operational budget

The risk of a Pension Provider failing are also being addressed. The Queen's Speech included an announcement of a Pension Bill to be enacted in April 2017 which will address the precarious status of many master trusts currently being used for auto-enrolment. The DWP have been quick to consult on how master trusts can be better regulated; the steps being considered are;-

1. A more rigorous fit and proper person test for sponsors and trustees of master trusts

2. A capital adequacy test for master trusts - with remedial powers for those who fail it

3. A possible insurance scheme that might enable under capitalised master trusts to pay a levy (as occupational schemes do to the PPF)

4. Consideration to making trustees personally liable for any losses experienced by members from a failure.

Engaging the public

Ros Altmann, the Pensions Minister has also been speaking about her longer term plans for auto-enrolment. She has spoken about nudging contributions up from current planned levels though "auto-escalation" and of improving the engagement of members with their pensin pots.

Her plans for improving engagement focus on the delivery of a pensions dashboard, allowing members to see both their workplace and their state pension through a digital portal and financial education, which she sees being delivered in the workplace (though detail on this is very sketchy).

So the Government appears to be developing plans for the future and not resting on its laurels. The more cynical readers may suspect that it won't be quite as easy as the Government think, and I'd agree.

However, there is no shortage of confidence in Whitehall and Brighton, that auto-enrolment v2.0 will be as successful as auto-enrolment v1.0. We will see.

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David Rowley
By drowley
03rd Jun 2016 10:51

Interesting comment made from Ms Altman about 'nudging pensions up' had the very same comment from a client yesterday who sited the very same thing. I of course remember the days in DC world when max levels started at 17.5% on Net Relevant Earning (15% in DB land) and that was always regarded as the contribution levels to strive to to make it all worth while....we shall see

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By pauljohnston
03rd Jun 2016 11:42

Regarding contributions levels look at Australia and NZ, I believe these are around 15%.

Can please ask Roz Altman to make AE less bureaucratic. Remove the right to opt out except if pension post exceeds £1m. Remove lower limit ie start at £0. Many of those with this lower level of income have a number of jobs so dont contribute. It is those on low income which will be the greatest burden on the state in retirement.

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