The Chartered Institute of Payroll Professionals ……………………………………………………………Policy News Journal
In the early part of 2017 the DWP will be engaging with stakeholders from across industry on these issues. Towards the end of 2017 a report will be published 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. The DWP 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 membership and the Terms of Reference for this group will be announced.
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Ten point plan to improve automatic enrolment 14 December 2016
Increasing minimum contributions is becoming a common recommendation, with analysis showing that the current minimum under auto enrolment will not return an adequate retirement income for most.
The Department for Work and Pension’s (DWP) is undertaking a review of auto enrolment in 2017 and we are seeing many organisations in the industry already conducting research to gather data for their input into the review
John Lawson, Head of Financial Research at Aviva says that some may argue the review is taking place too soon. Its date was set before the most recent timetable for enrolling small businesses and phasing contributions, so it will take place before the full outcome of the original policy is known. However, as Mr Lawson realistically points out, future policy takes years to come to fruition. He said:
“If we do not discuss this now, any potential changes will take even longer to be enacted. With that in mind, here are 10 policies we think would improve auto-enrolment.”
1. Increase minimum contributions to 12.5 per cent by 2028. 2. Adopt a flat rate of tax relief – save two get one free – and rename tax relief a “savers’ bonus”. 3. Bring multiple-job-holders into scope by combining their salaries to take them over the qualifying earning threshold. 4. Explore options to extend auto-enrolment to the self-employed. 5. Remove the upper enrolment ceiling of the state pension age to encourage a longer working life. 6. Officially encourage consolidation of small pension pots of £10,000 or less. 7. Permit “without consent” transfers of contract-based workplace pensions, so long as savers are no worse off. 8. Increase the eligibility threshold to £10,400 and lower the contribution threshold to £5,200 so that individuals can easily understand when they will be enrolled (once they earn more than £200 per week) and how much they will pay (contributions due on earnings over £100 per week). 9. Adopt the following three rules of thumb: a. 40-year rule: Aim to begin saving at least 40 years before your target retirement date. b. 5 per cent rule: Aim to save at least 12.5 per cent of your monthly salary towards your retirement. c. 10 times rule: Aim to have saved at least 10-times your annual salary by the time you reach retirement age. 10. Encourage the digitalisation of pensions through government policy and regulation, and a minimum level of digital functionality.
John Lawson also wrote in his article for Money Marketing :
“By debating these issues now, clear policies can be put in place to tackle what we already know will need to be addressed in the future.
Of course, any new rules need to take account of what happens once contributions increase to 8 per cent, as well as pressures faced by small business in an uncertain post-Brexit economy. With this in mind, timing measures is the real issue.
The Chartered Institute of Payroll Professionals
Policy News Journal
cipp.org.uk
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