Response to the auto-enrolment review
18 Dec 2017
Commenting on the proposed changes in the auto enrolment review, Lee Hollingworth, Head of DC Consulting, Hymans Robertson, says:
“Both the reduction of the AE starting age to 18 and lowering the threshold will lead to people saving more for retirement and any changes that result in this are very welcome. But it is disappointing that the changes are not expected to be implemented until the mid-2020s, which will be at a great cost to those who will benefit as they will miss out on many vital years of additional pension contribution.
“Lowering the age to 18, and basing contributions from the very first pound, will significantly increase the retirement outcomes for millions of savers, through the magic of compounding.
“These moves alone, however, will not achieve enough and other measures, such as pushing out the target retirement date to coincide with their State Pension Age and further increasing contributions to a total of 12%, will be needed to achieve an adequate income in retirement. Next year sees AE contributions increasing to 5% with a further increase to 8% in 2019, but there is still a long way to go. At 12% we would begin to see a contribution that will have a meaningful impact for employees’ retirement savings. At that level we can see far greater certainty of them reaching a target income that they can live on in retirement.”
Commenting on the proposed simplified pension statement, Lee says:
“There is a strong desire by both the industry and government to have clearer communication and increase engagement with employees about AE and their long term saving. The examples proposed are a significant step forward, but they could and should go further. Some context is needed to make saving tangible to the individual which is where a retirement income target can really help – setting a clear goal and providing clarity on the likelihood of achieving this goal.”