• Aegon calls on the Government to lead the way to continue championing pension saving
• Aegon concerned about growing auto-enrolment gap among low earning multiple jobholders, especially women
• Aegon believes preparations need to be made to raise awareness of the pending increase to employee contribution rates
“What auto-enrolment has achieved so far has been a huge success. However, government needs to lead the way in talking up the value of pension saving with the pending increase to employee and employer contribution rates in April 2018, we could be at risk of undoing a lot of that good work. While we support this increase, we acknowledge that if not supported by both the industry and government, it could rock the auto-enrolment boat and put a lot of people off pension saving in the workplace. Steps need to be taken now to ensure we minimise the risk of pension disengagement in the workplace.”
• Aegon concerned about growing auto-enrolment gap among low earning multiple jobholders
“The DWP analysis of auto-enrolment confirms our concerns that a growing number of the working population are missing out . Nearly 30% of low earning, multiple jobholders are still ineligible for auto-enrolment, and it’s mostly women who are falling through the cracks, representing 86% of this population.
“This means they won’t benefit from an employer contribution and won’t even be building up a State pension, as they earn less than the national insurance lower level of £5,824 pa (£112 per week), so don’t pay NI contributions or get NI credits.
“While the DWP’s analysis outlines a substantial number of people being eligible to opt-in, our experience with workplace pensions indicates that this approach is not working as people aren’t taking it up.”
• Aegon calls on the Government to lead the way to convert pension savers apathy to engagement
“More people might be saving in a workplace pension but we cannot assume this has directly fuelled a change in attitudes to long-term saving. Further work is needed to help employees recognise and appreciate the value of a pension before pension saving becomes a habit.
“We would urge employers to engage with and empower their employees to make the most of their pension scheme. We call on the Government to talk about the benefits of pension saving and why everyone should be doing it. This is critically important as we fast approach the pending increase in employee contributions in 2018 to three times the current level. Steps need to be taken now to ensure we minimise the risk of pension opt-outs in the workplace.”
Here, Aegon sets out its own priorities agreeing that employee engagement and widening the scope of auto-enrolment must be at the heart of the review.
Aegon’s wish list for the 2017 review of auto-enrolment:
1. Drive up member engagement - focus on member engagement with positive messages about the benefits of long-term savings. The Government should work with regulators, public advisory bodies, providers and advisers to drive up member engagement, and make pensions more visible, for example, by directing savers to online tools.
2. Encourage auto-escalation initiatives - incentivise employers to implement auto-escalation initiatives, encouraging employees to sign up to higher contributions from a future date, for example, related to a pay rise.
3. Freeze the earnings trigger - bring more workers into auto-enrolment by freezing the annual earnings trigger at £10,000.
4. Make it a condition of auto-enrolment that schemes must top-up non-taxpayers contributions with the government bonus – some trust-based schemes use tax arrangements which discriminate against non-taxpayers by not topping up their pension contributions.
5. Bring together low income multiple jobs - enable more low income workers with multiple jobs to benefit from an employer contribution by bringing together all their earnings, rather than exempting all employments where earnings are below the £10,000 threshold.
6. Make more earnings pensionable - make contributions more meaningful by gradually removing the initial band of earnings on which statutory contributions are not paid.
7. Give access to a pensions dashboard - Require all workplace schemes to provide access to a pension dashboard, where workers can see all their pensions, including the State pension, online.
8. Incentivise the self-employed to make the equivalent of auto-enrolment pension contributions.
9. Ban employer contributions to LISA - ensure the Lifetime ISA is not allowed to undermine auto-enrolment and with this in mind, continue to ban employer contributions to LISA.
10. Sign-post advice and guidance services – encouraging more savers to access advice
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