Following on from yesterday’s news of the Auto-Enrolment (AE) delay, we have a further update which can be viewed below:
The most significant point in this update is that it looks like the 2016 increase date for contributions will now be moved further away. So, contrary to my post yesterday (when this detail was not available), it looks like the costs for all employers will be eased a little here as well.
As this would appear to apply to all companies, and not just the smaller ones, I am fairly concerned that the wheels may be coming off AE before it even commences. In practice this will probably mean many large employers auto-enrolling employees in 2012 at the minimum legal level, and that level then not being increased until, say, 2017 (or possibly even later).
For AE to have any any tagible impact on the Savings Gap, it will be key that both employee and employer contributions increase quickly from the starting level of 1% of qualifying earnings, as this minimal base level will produce very little pension in itself.
The longer employees save at the minimum level without increases, the more likely we will get media scare stories about AE and the pension returns. Under these revised terms an employee could save for half a decade (albeit at the minimum level), and yet only receive a pension of a few pounds a year in return. Such stories could put many others off saving, which in turn will lead to higher opt-outs when they are also auto-enrolled.
We don’t have the full details, and probably won’t before next year now, but will keep you updated as soon as its available.
Best regards
Steve
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