PLSA Annual Conference 2017: Despite unanimity on the need to increase coverage and boost contributions, there is still a distinct lack of consensus on exactly how to address these issues, according to independent advisers on the government’s auto-enrolment review.
The government appointed its advisory group in February this year to support its auto-enrolment review, which has been focusing on the issues of coverage, improving engagement and investigating the appropriate level of contributions.
Most people would say, ‘Yes, let’s do something to get the self-employed saving’… but few people necessarily agree on the answer as to how
Jamie Jenkins, Standard Life
During a panel session at the Pensions and Lifetime Savings Association’s annual conference in Manchester this week, three of the group’s members gave their views on the challenges ahead.
Nobody should be excluded
Jamie Jenkins, head of pensions strategy at Standard Life, said: “Right through all of [auto-enrolment's] first five years we’ve seen quite remarkable success so far.” He credited employers for being the backbone of the intiative, but added: “The job is only half done.”
His task, as part of the review which he said will conclude in December, is to look at coverage.
Following a consultation carried out earlier this year, he said that there were more than 60 formal responses and “we’ve almost exhausted the number of questions we can ask of various stakeholders”.
Jenkins said that there was consensus that nobody should be excluded from auto-enrolment, to avoid setting "a dangerous precedent".
Few people agree on an answer
While the need to include more people in auto-enrolment is now common ground, detailed proposals were more difficult to agree.
“Most people would say, ‘Yes, let’s do something to get the self-employed saving’… but few people necessarily agree on the answer as to how and exactly which groups,” Jenkins said.
He noted that the self-employed are not a homogenous group of people, something that “doesn’t necessarily lend itself to one easy magic bullet solution".
Jenkins also said “feedback has generally been quite varied” over the £10,000 earnings trigger, with some urging for it to be removed entirely or reduced, while others think it should be increased.
“Most people suggest that there’s little logic in age 22 as a starting point,” he said, but added: “There’s little consensus as to what the age should be.”
Consensus on increasing contributions
This lack of unanimity among consultation responses also extended to contributions, according to Pensions Policy Institute director Chris Curry, the panel member tasked with addressing adequacy.
While nearly every response suggested that there might need to be an increase in minimum contributions at some point, Curry said that “there was no consensus at all about what the right level should be, or how it should be implemented, or when it should be implemented, or who should bear the burden of doing that”.
He said: “It is going to be quite difficult, I think, to come up with a single answer in the short term.” As such, the review has stated that now is not the right time to decide on future rate increases.
“Automatic enrolment is at the start of a journey,” he said, adding that the “consensus that people need to save more” is “the one thing that we’ll take away”.
Contributions into workplace pension saving will need to be higher, but whether that is done through auto-enrolment, voluntary saving or outside the workplace “is a question that I think we’ll come back to later on”, Curry added.
Stamp out jargon
In its report on consumer engagement earlier this year, the Pensions Policy Institute highlighted that auto-enrolment “does not solve the problem of low levels of engagement with contribution rate decisions, as those who are defaulted into saving are by definition less engaged than those who opt-in”.
AE review: Tension between engagement and inertia comes to the fore
PLSA Investment Conference 2017: With the Department for Work and Pensions’ review of auto-enrolment underway, advisory groups have been seeking views on engagement, contributions and coverage, but questions remain over the necessity of engagement and the pensions reality in other countries.
During the panel session, chair of Tesco Pension Trustees Ruston Smith, tasked with looking at engagement for the review, said that the industry “has created a legacy of jargon”.
“The problem is that we’re creating almost regional dialects, because we’re all trying to keep it simple," he explained. Using different words means that there is no consistency of terminology.
“We have to think more holistically about engagement,” he said, citing the ways in which the pensions dashboard could help bring all that information into one place to make it simple, using the same terminology and being consistent.
