Having been Minister for Pensions for approaching a year now, I have met so many people—whether it be members of the public, charities, people from the pensions industry—who understand that pensions are something that affect everybody, whatever their age, background or occupation.
We all should be thinking about our retirement at every stage of our adult lives. Whether it is checking to see when and how much we can expect from the state; looking at our private pension savings and considering if we have as much as we want; or exploring the different options for what we can do with that money, we all need to be planning ahead and getting to know our pension.
What is most important for me in this job is doing everything possible to make sure that tomorrow’s senior citizens have the income they need to maintain the lifestyle they want in retirement. As well as action by government, that also requires people to be alive to their own pensions situation.
One of the biggest changes in policy in this area over the past decade has been the introduction of automatic enrolment—a new system under which most employees are put straight into their firm’s pension scheme. It is changing the face of the savings landscape, encouraging more people to save early and setting them on a path to a financially secure retirement. Since it was introduced in 2012, many of those saving into a workplace pension are in their twenties and thirties.
Many of this group may not have had access to a workplace pension at all before this policy was introduced and, in years to come, it will help transform their standard of living. It is estimated that an extra £17bn a year will have been saved by 2019/20.
But the change isn’t just for individuals—it’s also for businesses which have been tasked with enrolling their staff. The process began with large employers, many of which already provided workplace pensions. More recently, we’ve moved on to smaller businesses, for which the process can be more complicated, not least because they may need to establish a scheme for the first time. Over a million small and micro employers are expected to have enroled by March 2018, and we need to help them get this right.
One micro employer I met recently was clear that supporting pension saving is the right thing to do, but also told me about the challenges they face in meeting legal obligations while focusing on managing the growth of his business. This feels like a view that may be common to many small businesses. So while auto-enrolment continues to be a huge success, it is essential that we continue to provide the necessary help and support to the employers making it happen.
We have been working with the Pensions Regulator to provide as much support as possible including practical guides on how to go about setting up a pension. Happily, we have not seen any significant problems with compliance and the vast majority of businesses are embracing the opportunity to provide this new employment right to their staff.
Now saving is starting to become the norm, and few people are opting out, we know that we have to build on this success and this will bring new challenges. We have recently launched a review to consider ways that the policy can be further developed. Three themes will be considered as part of this, including: contributions, engagement with automatic enrolment and coverage, and who is included in the policy.
Through the work of this review, we will look at how we can extend and enhance automatic enrolment, bringing the world of private pension saving to even more people, helping to set up future generations of pensioners for a secure and dignified later life.
Given we now have millions of new savers, I also want to ensure the right protections are in place to help them make the right choices so their hard-earned savings work for them.
That is why we are consulting on a new, single guidance body, which will offer a one-stop shop for all questions about financial matters. We are also speaking with the industry on new measures to prevent pension scams and ban cold-calling. It is crucial consumers are educated about their options.
In the scheme of such major policy changes, automatic enrolment is still in its infancy, but I am confident that it will continue to be a success and future generations will reap the rewards.
