Guest column: a chance not to miss

Government adverts are on the telly, employees are receiving letters in the post, and payroll departments are busy testing their systems.

By the end of the year we will have automatically enrolled 600,000 people. By the time the rollout is complete in 2017, we will have more than seven million new people saving in workplace pensions with the backing of employer contributions.

This is going to be a fantastic achievement and the politicians of all sides that joined the cross-party consensus behind auto-enrolment deserve congratulations.

I think Yes Minister’s Sir Humphrey would have cautioned them about making ‘a brave decision’. But instead they listened to Tony Blair, who in a famous party conference speech declared “we are at our best when at our boldest”.

In many ways auto-enrolment resembles the launch of Blair’s stakeholder pensions 11 years ago. The focus is on the workplace and the product is very similar – usually a personal account with very low charges.

But two magic ingredients have been added this time round that were missing in 2001.

Employers will have to contribute, nearly doubling the employees’ contributions. But more important still is the guile of auto-enrolment. You are in unless you opt out.

They’ve given us a chance not to miss out on a secure future.

Auto-enrolment will reverse the direction Margaret Thatcher took us in 1986 when her legislation stopped employers from making pension scheme membership compulsory. Thatcher gave people the chance to miss out on a secure future.

Today, in a strange world of double negatives and assumed consent, scheme membership will be compulsory if people don’t ask not to be included.

All those that can’t be bothered to make their minds up will be inside the camp. I applaud the politicians that have created this magic, and steered it past obstacles from Brussels like the distance marketing directive that might have shipwrecked it.

My only concern is the government is not being honest about their ‘contribution’ to people’s pension pots. Promoting auto-enrolment it claims that if the employee contributes then the employer must too, and so will the government.

But the only thing the government pays into a scheme operating relief at source is the tax the employee has just paid. On net pay arrangements, government makes no actual contribution at all.

What the government really does is to allow pension savers to defer paying tax on their pension contributions until they retire and actually draw the money. Both ‘government contribution’ and ‘tax relief’ are misnomers.

Now, deferring tax payments until later is a powerful incentive – we all like putting off unpleasant things – and I’d like to see it recognised as this and honestly described.

Auto-enrolment will be a big success – there’s no need for the government to gild the lily.

Adrian Boulding is pensions strategy director at Legal & General