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Gov't can't do auto-enrolment before 2012

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  • Gov't can't do auto-enrolment before 2012

UK - The UK government does not believe it will be possible to introduce auto-enrolment into pension schemes before 2012, despite calls from the industry to implement the measure now.

Speaking at the Association of British Insurers (ABI) Savings Conference 2008, Ian Pearson, economic secretary to HM Treasury, told delegates it would be difficult to bring in the measure for existing schemes now and it would be unfair to only target employers establishing new schemes.

The ABI had previously called for the government to bring forward plans for auto-enrolment into existing schemes, and had suggested the Pre-Budget Report (PBR) could have provided a way to speed up the legislation.

Stephen Haddrill, director general of the ABI, said: "It was particularly disappointing that the government did not use the PBR to give pension saving a real boost by bringing forward plans for automatic enrolment into workplace pension schemes. But it's not too late, and we will continue to urge the government to take this action."

But in a panel session, Pearson said he doesn't believe "we can bring auto-enrolment into force as a government for existing policies until 2012", and in reference to the current economic turmoil he added, "I'm not sure now is the right time to ask employers to make 3% contributions to pensions".

However, Nigel Waterson, shadow pensions minister for the Conservative opposition party, said it was "taken with the idea of bringing in auto-enrolment now", and said the ABI's call for accelerating the process was "refreshing as it reminds us the aim is to encourage people to join existing schemes".

Maggie Craig, director of life and savings at the ABI, added: "Auto-enrolment in the way we're talking about it is a process whereby it is easier and quicker to get people in the pension scheme. I don't think it is rocket science."  

Meanwhile, Waterson revealed while there is general political agreement on a "post-Turner" settlement, including the introduction of a low-cost simple pension scheme, there are a "couple of deal breakers".

He said: "Where we part company is how the architecture of personal accounts will work. There are a couple of deal breakers for use, one is means-testing - which is the elephant in the room - and then there's levelling down."

The shadow minister suggested the "obvious solution" to the means-testing issue is to "roll back means-testing" and claimed one step the government missed would have been to announce a date for restoring the link between the basic state pension and earnings in the PBR.

He said: "There is no guarantee people will be any better off if they save for retirement. We would reign in means-testing and in the short-term look at the "at risk" groups from personal accounts, which could be tackled through a pension disregard or fiddling with trivial commutation."

Malcolm McLean, chief executive of The Pension Advisory Service (TPAS), told delegates the "nightmare scenario" would be in April 2012 when personal accounts are launched and there is a media campaign telling people to opt-out of the scheme.

He pointed out although it "would not necessarily be a problem for young people, the perception is affecting everyone and if nothing is done then personal accounts will be a disaster."

Waterson admitted while there is "room for a low-cost simple scheme, the question is whether the current design is it, and the jury is still out on that."

McLean added "nobody wants to see a situation where the scheme doesn't work", but argued there is a problem that needs to be addressed and it would be "irresponsible if people do not do everything to try and make it work".

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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