Automatic Enrolment: Review

Lord Harrington of Watford Excerpts

Monday 12th December 2016 Written Statements

[The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)]

I am pleased to confirm both the scope of the automatic enrolment review and the proposed automatic enrolment thresholds for the next financial year.

Automatic enrolment has been a great success to date with almost 7 million people enrolled by more than 293,000 employers. It will give around 11 million people the opportunity to save into a workplace pension and we expect this to lead to around 10 million people newly saving or saving more by 2018, generating around £17 billion a year more in workplace pension saving by 2019-20.

Analysis cited in DWP’s annual automatic enrolment evaluation report today shows that nearly £82 billion was saved into workplace pensions last year by employees who were eligible for automatic enrolment.

Automatic Enrolment Review

It is important to continue to build on this success, and I am keen to ensure that there is joint consensus from across industry as we move to the next stage of this policy.

The main focus of the review will be to ensure that automatic enrolment continues to meet the needs of individual savers. In doing this we will look at the existing coverage of the policy and consider the needs of those not currently benefiting from automatic enrolment, for example employees with multiple jobs who do not meet the criteria for automatic enrolment in any of their jobs. We will also examine the automatic enrolment thresholds namely, the trigger and the qualifying earning bands required by legislation (section 14 of the Pensions Act 2008) and the age criteria for automatic enrolment. I would also like to use the review to consider how the growing group of self-employed people can be helped to save for their retirement.

The review will be an opportunity to consider whether the technical operation of the policy is working as intended. In doing this we will consider whether there may be any policies which disproportionately affect different categories of employers or could be further simplified.

The review will also include the requirements set in legislation relating to the statutory review of the alternative quality requirements for defined benefits schemes (section 23A of the Pensions Act 2008) and for the certification requirements for money purchase schemes (section 28 of Pensions Act 2008).

An examination of the level of the charge cap, which was intended to take place in 2017, will also be incorporated within this review. This will assess whether the level of the cap should be changed and whether some or all transactions costs should be covered by the cap.

In the early part of 2017 we will be engaging with stakeholders from across industry on these issues. Towards the end of 2017 we will publish a report setting out policy recommendations.

The review will be an opportunity to strengthen the evidence around appropriate future contributions into workplace pensions. It will also consider how engagement with individuals can be improved so that savers have a stronger sense of personal ownership and are better enabled to maximise savings. We do not expect to make policy decisions on these areas during 2017.

The automatic enrolment review work will be led by a DWP team and supported by an external advisory group. This group, which will be chaired by and made up of experts from within the pensions industry, and those representing member interests and employers, will provide insight and a challenge function to help shape proposals. In early 2017 we will announce membership and the terms of reference for this group.

Annual Thresholds review

The annual review of the automatic enrolment earnings thresholds has also now been completed.

It is intended to lay an order before Parliament in the new year which will include the following, for 2017-18: £45,000 for the upper limit of the qualifying earnings band; £5,876 for the lower limit of the qualifying earnings band.

The automatic enrolment earnings trigger will be frozen at £10,000.

I will place a copy of the analysis (review of the automatic enrolment earnings trigger and qualifying earnings band for 2017-18: supporting analysis) supporting the proposed revised thresholds in the House Library. These papers will be available later today on www.gov.uk website.

[HCWS339]