Industry leaders are hopeful that the appointment of Torsten Bell as pensions minister could reignite discussions about increasing the contribution rate for auto-enrolment pensions.
Bell assumed the pensions brief on Wednesday following a mini-reshuffle triggered by Tulip Siddiq’s resignation as City minister, as reported by .
Emma Reynolds, his predecessor, has taken over Siddiq’s former role. Bell previously served as chief executive of the Resolution Foundation, a left-leaning think tank that has advocated for higher auto-enrolment contributions to fund domestic investment and enhance financial security for retirees.
Auto-enrolment pensions were launched in 2012 to counteract the decline in workplace savings. The policy is widely regarded as successful.
According to government data, º£½ÇÊÓƵ employees saved £114.6bn towards their pensions in the decade following its introduction in 2012, a real terms increase of £32.9bn. At present, the minimum contribution for these pensions is divided, with employers contributing at least three per cent and the employee the remaining five per cent.
However, in Ending Stagnation, a book co-authored by Bell during his tenure at the Resolution Foundation, he argued for an increase in contributions. "The next phase in its development should be a levelling up of the minimum contributions by both employers and employees to six percentage points (from three and five per cent respectively), representing a 50 per cent increase in total," he wrote.
"A capped amount of these savings should be made available for everyday contingencies – tackling precarity for individuals as we underpin higher investment for the economy as a whole."
stated an advocate for increased auto-enrolment rates in the pensions industry. This view supports that such changes will secure more adequate savings for future pensioners.
"In the next five years, the majority of defined contribution pension savers will enter retirement with less income than they expect or need, and this will worsen to a peak in the early 2040s," warned Andy Briggs, chief executive of Phoenix Group, in his remarks to City AM. Briggs highlighted that increasing auto-enrolment contributions is critical, branding it the "single biggest lever" the government could utilise to rectify the impending pension shortfall.
Despite pledges that pension adequacy would be reviewed during the second phase of its pension review, the Financial Times reported that Chancellor Rachel Reeves had postponed said review indefinitely. The cause for the postponement, as noted by media sources, was concern over imposing additional burdens on businesses following the Budget's pressures.
Briggs optimistically noted that alterations could be executed "as economic conditions allow" and recommended a develop "roadmap" to guide businesses and households preparatively.
Moreover, Lisa Picardo, Chief Business Officer º£½ÇÊÓƵ at PensionBee, expressed hope that Bell's appointment might "revive necessary discussions" regarding auto-enrolment contributions.
Zoe Alexander, director of policy & advocacy at the Pensions and Lifetime Savings Association, expressed her optimism about the appointment, stating it could lead to "progress on both phases of the Pensions Review".
The initial phase of the pensions review has been centred around consolidating the º£½ÇÊÓƵ’s fragmented pensions industry and encouraging schemes to invest in the domestic economy.
The deadline for firms to respond to phase 1 was on Thursday. A Government spokesperson said: "Creating wealth and driving growth is at the heart of our Plan for Change. We are determined to ensure that tomorrow’s pensioners are supported, which is why the Government announced the landmark two-stage Pensions Review days after coming into office and why the Pension Schemes Bill was in the King’s Speech."
They added: "Automatic Enrolment has turned millions of people into pension savers with around 9-in-10 eligible employees saving for their retirement."
"And more than 15m pension savers could benefit from our new Pension Schemes Bill, with the potential for an average earner to have £11,000 more in their defined contribution pot by retirement when saving over a career."
