UK pensions minister must achieve greater auto-enrolment contributions

A think tank with historical links to the government has announced that new Pensions Minister, Ross Altmann, must prepare for a higher target for auto-enrolment pensions, deeming the current goal of 8% is insufficient.

The directions published for Altmann by the Centre for Policy Studies (CPS) state that in her new position, Altmann should survey the roll-out of auto-enrolment for workplace pensions, with the opt-out rate for small and moderately-sized business singled out particular attention.

Additionally, Pensions Analyst Michael Johnson, the author of the report, advised Altmann to “prepare the ground for raising contribution rates, today’s the destination of 8% of band earnings being insufficient”. He also added that Altmann should contemplate how to implement auto-enrolment for the self-employed.

Altmann, a high-profile industry figure, was appointed Pensions Minister at the UK Department of Work and Pensions (DWP) by a newly elected David Cameron, the government announced earlier this month. Altmann replaces Liberal Democrat Steve Webb in the role, Webb having lost his seat in the last general election.

She takes the place of outgoing minister Steve Webb, a Liberal Democrat who lost his parliamentary seat in last week’s general election. The suggestions concentrate on promoting the renewal of a savings-focused culture, the CPS said, and, from the point of view of the treasury, all were cost neutral.

“They would, if sensitively implemented, lead to greater independence and prosperity for individuals in their retirement and greater sustained economic growth for the whole nation,” said the centre.

Mr. Johnson advised Altmann to hone a  Johnson said the new pensions minister should establish a major vision for saving, one that endorses a wider-based savings environment. The goal of this would be to increase the savings ratio of national households from 5.9% in the previous quarter, to approximately 13% – the mean ratio in the 1980s.

In order to make good that idea, Altmann needs to develop a strategy that builds on various principles, counting To realise that idea, the new minister should devise a strategy that includes various principles, counting simplification, transparency  and intergenerational objectivity over commercial concerns and interests. A solid trust-based, fiduciary, governance was likely more effective that any form of regulation, said Johnson.

It was further suggested that the new minister should aim at eradicating the “profitable inefficiencies and rent-seeking behaviours” of the industry and incorporate ISAs (Individual Savings Accounts), a savings wrapper exempt form tax, in the auto-enrolment legislation.

Johnson added that Altmann also needed to organise the issue of small pension pots with She should also sort out the small pension pots problem with the aggregation of isolated savings, instead of employing the pot-follows-member notion. This would prompt NEST, the auto-enrolment pensions provider, and their competitors to design a collective drawdown capacity, enabling the retired to poll their longevity risk.

The CPS reiterated its request that the government combine the 101 Local Government Pension Scheme funds to a solitary fund, with four separate asset allocators in mutual competition.