Talking Head: Auto-enrolment is part of a cultural shift that requires time and for providers to engage with savers, says pensions minister Ros Altmann.
I’m sure most readers will know that auto-enrolment has been a key priority for me since becoming minister for pensions.
It will soon be the norm for every UK employer to organise not only tax and national insurance contributions for their staff but also a pension.
It is essential that we focus on the successful implementation of auto-enrolment before considering changes to minimum contributions
We are now at a crucial phase of the rollout of auto-enrolment, as small and micro employers with qualifying employees must work towards enrolling their staff.
This is brilliant news but brings with it new challenges. One of these is for us to ensure these employers actually know they have pension responsibilities – many of them may not yet realise this.
Then, we must ensure all employers have the help they need to meet their obligations and try to minimise red tape as much as possible.
Long-term rollout
In his Autumn Statement, the chancellor announced changes to the timetable for increasing auto-enrolment contribution rates.
Minimum contribution rates were scheduled to increase from 2 per cent to 5 per cent in October 2017, but this will now take place in April 2018; the scheduled increase for October 2018 will take place in April 2019, aligning the higher contribution levels with the tax year.
This will help reduce employer costs and also benefit individuals, as rising tax thresholds can offset the impact of higher contributions on their take-home pay, thereby ensuring fewer will opt out of pension saving as contribution rates increase.
It is essential that we focus on the successful implementation of auto-enrolment before considering changes to minimum contributions.
Auto-enrolment is a long-term policy that will not be fully rolled out until early 2018.
Even though we realise the auto-enrolment minimum contributions are not enough to tackle undersaving in pensions, we must not rush too soon to raise mandatory contributions.
However, there is nothing to prevent employers or staff paying in more than the current minimum levels, and many are already doing so.
This is the start of a cultural shift towards better pension saving. And of course it is vital that the industry provides good products and services for customers. I urge pension providers to engage all these new savers.
Auto-enrolment has the potential to change the face of retirement in generations to come, but to make it a success we need to bring employees, employers and the industry with us on the journey.
We have a long way to go, but I am delighted we have already made much good progress for millions of workers in this country.
Ros Altmann is the pensions minister
