“Overall, the Work and Pensions Committee’s investigation and report are welcome additions to the cause of re-establishing occupational pensions membership as a natural feature of working life; given the importance of the initiative, it is right and proper that the issues should be kept under review. However, given that we are so far down the line towards the introduction of auto enrolment, it would be counterproductive to introduce further changes at this time. The current sensitivities around pensions are such that every effort must be made to ensure that auto enrolment works. The focus has to be on getting the system up and running smoothly and effectively; we can build upon it later if we have to - preferably by voluntary action, rather than prescription.”
Looking at some of the specific items, Le Grand commented:
• Early access - “There are strong arguments for and against, making this a difficult issue on which to achieve a sensible balance. We need to be careful that pensions schemes are not looked at as just another savings scheme; they have a clear and specific purpose – the provision of income in retirement. It is axiomatic that this requires a substantial fund, and allowing early access to that fund as if it were a general savings scheme goes against that. However, if people are genuinely (and the case remains unproven) put off from committing to pension saving by the thought that they might need (or want?) access to some or all of the money at an earlier date, prohibiting early access might be hindering overall pension saving. At the very least, on current statutory minimum contribution rates the funds building up (particularly by definition at an early age and therefore after only a short period) would be too small to be spared for other things, and probably also provide very little help towards the purchase of a house. The proposal is therefore unlikely to be of much practical advantage, but would bring with it a significant increase in complexity.”
• Positioning the minimum income threshold and statutory minimum contribution levels – “Decisions on these issues are in the political realm; for the moment stability should be the key priority and so any change in these levels to widen accessibility and increase contributions should not be rushed – despite the urgent need to get overall pensions savings levels up. Tinkering with these issues at this sensitive time would threaten the success of the whole auto enrolment project.”
• Ensuring value for money - “This is an important issue and one which needs urgent attention. The action is one for providers, and so any changes will not affect what employers or employees have to do to comply with auto enrolment. It should be addressed now – as indeed it is.”
• Communications - “These are vital, but to be fair the DWP and the Pensions Regulator have been working hard in this area and have clear and strong strategies already.”
• The operation of NEST – “ There are arguments for and against widening the operating parameters of NEST, but some of them depend upon decisions to be taken in other areas, such as in respect of the small pots consultation. It would be premature to make changes that pre-empt these other decisions. Meanwhile, I understand that NEST themselves are generally comfortable that they can work within their current restrictions and still be effective, so again there seems to be little point in making changes at this point. “
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