Pension experts have attacked auto-enrolment as “a glorified ISA” and a “pointless scheme”, warning savers will never get a decent retirement pot due to low contribution rates.
Speaking during the Pension Prophets panel at Pensions and Benefits UK 2016 on 28 June, they warned the policy was likely to disappoint auto-enrolled savers.
Independent Trustee Services Limited director Peter Askins said auto-enrolment was a “policy too far”.
He told delegates: “Auto-enrolment can never be meaningful. Whether it is 1%, 2% or 3%, it [the contribution] is never a meaningful amount. 8% is not a meaningful amount.
“I think it’s cruel and a deception to say to people they are going to get a pension from auto-enrolment over the next ten years. No, they’re not; they’re going to get a good night out.
“This is wrong-headed. It makes people think they are going to get a pension and they are not. It is only a glorified ISA.”
Pinsent Masons consultant and professor of pensions laws and economics at the Cass Business School Robin Ellison agreed, citing the conclusions of an Australian scheme.
“In Australia, where they’ve been running an auto-enrolment scheme for 25 years quite successfully, they’ve not been able to get [contributions] up to 12%. It’s just too much. We’re going to have the same problem. It will have a very short life span.
“Auto-enrolment is just a pointless scheme. The overheads will be disproportionate [and] it will be seen in five or ten years to be a noble but mistaken effort.”
The criticism comes as recent figures from The Pensions Regulator suggested only 26% of workers have not been auto-enrolled into a workplace pension scheme.
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