The UK must let the launch of auto-enrolment conclude before debating whether and how to increase the minimum contribution rate beyond 8%, the former chief executive of the National Employment Savings Trust (NEST) has urged.
Tim Jones, who, as chief executive of the Personal Accounts Delivery Authority, oversaw the development and launch of NEST, told the IPE Conference & Awards it was important to see how opt-out rates – currently below one in 10 members enrolled – changed as the minimum contribution rose from its current 3% to its eventual target of 8% by late 2018.
Representing NEST for the last time following his departure, Jones told attendees in Barcelona that, once the scheduled increase had occurred, it would be time to “take stock and see what kind of politics we can engineer” to progress.
“My position is 8% is better than nothing,” he said. “It is a platform from which to build, but I would love to see the rate move up, somehow, by the mid-2020s to 12% or 14%.”
Jones said he was unconvinced that auto-escalation, whereby members can opt to forego some of their annual salary increase to raise contribution levels, or paternal employers matching additional contributions made above the 8%, would “shift a dime”.
“The only way to shift a dime will be to find a political way to shift the 8% to 10%, to 12%.”
He cited Australia’s trouble in raising the mandatory level of contributions as evidence that it was “tough” to achieve such an increase.
The Australian rate of contribution was legislated to increase from its current 9.5% to 10% this June, eventually reaching 12% by 2019.
Following a change of government, the increase to 10% was deferred to 2021, after which there will be an incremental increase of 50 basis points each year until the rate reaches 12% by 2025.
Jones said it was important to “get people comfortable” with the idea of auto-enrolment and contributing to pension schemes.
The matter of contribution levels, he said, could be addressed afterwards.
The retail banker announced in early 2015 he would be leaving NEST and has since been replaced by former head of product and marketing Helen Dean.