Pension reforms too late for middle-aged, says Sir Steve Webb

Andrew Cummings
December 18, 2017

"But the proposed pace of change is shockingly lethargic".

Analysis published yesterday by the Department for Work and Pensions found four in ten employees eligible for auto-enrolment, its flagship saving scheme, are "under-saving".

It is estimated the changes outlined in the review will deliver an additional £3.8bn of pension contributions, taking the total to £24bn per year.

Nathan Long, senior pension analyst at Hargreaves Lansdown, said: "Starting from age 18 instead of waiting until 22, and allowing contributions to apply from the first pound earned, will transform people's retirement prospects". Currently, individuals contributing to pensions through auto-enrolment do not pay contributions on the first £5,876 of their earnings. The government estimates the extension will bring in another £2.6bn of contributions.

"The Government needs to find ways to bring contribution rates back up again or people on higher salaries are at a high risk sleepwalking into a retirement where they can not afford to maintain their lifestyle". Around 4.8 million individuals, or 15% of the United Kingdom workforce, now classified themselves as being self-employed, according to the government.

Pensions minister Guy Opperman recently confessed "there is no simple solution" for including self-employed people in auto-enrolment.


DWP analysis published alongside the review report revealed that 12 million workers are now under-saving even though the majority of employees and employers are contributing at a higher rate than the AE minimum.

"We are committed to enabling more people to save while they are working, so that they can enjoy greater financial security when they retire".

The changes, to be announced by Gauke this week, will mean around 900,000 young people in the workforce will soon find themselves saving into a workplace pension. "This ambitious package will see more people than ever before helped onto the path towards building a secure retirement".

There were varied reactions from the pensions industry.

He continued: "As well as widening access to pensions, this review signals that pension contribution levels will be reviewed after the implementation of the 8 per cent contribution rate in 2019".

It was "vitally important" to get more self-employed people saving for their retirement, he added, citing figures showing that the number of self-employed people who contributed to a pension scheme fell from 1.1 million to 380,000 between 2001 and 2015. "Talking about having reforms in place by the mid-2020s risks leaving a whole generation of workers behind".


The findings are the results of a major study into the success of auto-enrolment.

From the perspective of businesses, however, the reform schedule was welcome.

"A timeline of the mid-2020s for new proposals would be sensible and enjoy business support", he said.

The DWP also intends to work "with organisations that use self-employed contracted labour to understand whether or not they can help to facilitate pension saving", and with other entities "who act as touch points for the self-employed, such as banks, to explore how technology could assist in facilitating pension saving".

For the federation of British trade unions, the government review was "a mixed bag".

It said these proposals would set a "clear direction to build a more robust and inclusive savings culture" - boosting median earners' private pension provision by over 40% and lower earners by over 80%.


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