It’s incredibly pleasing that one of the first bills to see the light of day in this parliament was the much-needed pension schemes bill.
Covering collective defined contribution, the pensions dashboard, and regulatory powers, the prospective law marks a radical change in how the UK approaches retirement provision. As well as recognising the want of some employers to retain a paternalistic stance for the benefit of their workforce, it will give savers more confidence and knowledge for their later lives.
Indeed, as The Pensions Regulator chief executive Charles Counsell remarks in his piece written for RP’s sister publication Professional Pensions, the bill will grant a strong deterrent against risky and reckless behaviour. Along with its continuing enforcement work and high-profile action, this can only serve to comfort the public that their hard-earned retirement pots will be safe.
Yet, at the same time, the bill is lacking. As many have noted, it fails to address the need to continue boosting auto-enrolment (AE). It has been over two years since the AE review was published but little work has been done to advance its key recommendations.
With a renewed parliamentary majority and Brexit now making progress, the Budget in March is a perfect opportunity for the government to get the ball rolling on AE reform, not least on plans to increase minimum contributions. At present, there is a well-noted danger that savers believe their contribution rates are meeting official recommendations. Having a safe retirement pot is almost inconsequential if it does not sustain a member through their entire retirement.
With the minimum wage set to increase by up to 6.2% in April, the government could also remove the lower earnings limit for AE contributions, making every penny of earnings pensionable, as well as reduce the qualifying age to 18, or even 16. Done in tandem, the effect on take-home pay can be mitigated while improving retirement prospects.
Chancellor Sajid Javid said the Budget was designed to “usher in a decade of renewal”. Let’s hope the AE programme will be included in this pledge.
James Phillips is deputy editor of Professional Pensions