Editorial: Auto-enrolment has certainly succeeded so far in helping more people save for retirement. But there is still a lot more to be done.
Nearly 10m people have been auto-enrolled into a workplace pension since the initiative was introduced in 2012.
Phased increases of minimum contributions began in April – bringing total minimum contributions to 5 per cent. Next year, they will rise again to 8 per cent. Recent research has suggested savers do not seem to be perturbed by the change.
While this paints a positive picture, further increases are still needed if we want to bridge the UK’s retirement savings gap.
The Pensions and Lifetime Savings Assocation has called on the government to raise the minimum contribution levels from 8 per cent of band earnings to 12 per cent of total salary between 2025 and 2030, with at least half of this coming from employers.
It does not look like the Department for Work and Pensions will consider further rises until after the current increases have been phased in, though they are monitoring the situation.
Minister for pensions and financial inclusion Guy Opperman said last week that he intends to deliver a “very substantial” bill addressing several areas of pensions regulation in summer 2019.
This involves “trying to kick as many consultations out of the door of the DWP” and have them concluded by Christmas (read more on page three).
But, as the Pensions Regulator’s David Fairs pointed out, if the consultation paper creates the need for legislation, it will still be about two years before this comes into effect (page nine).
Meanwhile, the regulator and the Financial Conduct Authority’s joint strategy will prioritise member outcomes, with the two watchdogs having recently announced an upcoming review of the consumer retirement journey. They will also be focusing on standards when it comes to assessing value for money (page seven).
It all seems promising for improving retirement adequacy. But bridging that pensions gap will require continued industry, government and regulatory collaboration, and – by the sounds of it – a lot of patience.
Sophia Imeson is associate editor at Pensions Expert. You can follow her on Twitter @SophiaImeson and the team @pensions_expert.
