28/01/2014
NEST Insight event - Taking the temperature of automatic enrolment
[Check Against Delivery]
Today is topical because it seems barely a day goes past when we don't read about another planned scheme for the pensions world.
Yesterday's newspapers were a case in point. So it is an entirely healthy exercise - and a necessary one - to take stock of the biggest programme of reform of workplace pensions the state and industry have ever tried to carry off; auto enrolment.
Auto enrolment has been a decade in the making, and as the consultation on the charge cap and the Office of Fair Trading (OFT) audit have proved, the policy making and regulatory response is still going on, even as we enter the key phasing points.
The ABI and its members believe in the importance of the task - including of low–charging workplace schemes - and have responded with agreements on transparency, governance, value for money as well as engaging in reform of annuity choices and the future of retirement products.
Auto enrolment should be something we Brits become proud of and we are committed to doing our part and as an industry, we recognise we have more to do to deliver commitments on the OFT audit and transparency.
But challenges remain:
Increasing contribution levels - the original levels were set deliberately low to maximise employer and cross party support. I know - I worked for the Govt at the time and remember the internal debate well. As no subject seems to be off the table, let's start talking now about auto-escalation and if nudge should become compulsion post roll-out.
Maintaining persistency - we mustn't be complacent - and NEST certainly isn't - that Year One opt-out rates will persist with medium and smaller employers. The Government has done well to resist calls for wholesale exemptions and we should give it our public support in continuing to do so.
Finally, we have to achieve some political stability about the pensions system in this country – otherwise we will never fully succeed in persuading people to save more and stick with auto-enrolment. I suspect I speak for many when I say that the benefits of fixed term parliaments are going to seem remote if the entire period between now and May 2015 becomes solely one extended election campaign.
This is a critical time to deliver auto enrolment and we need some stability to deliver on our promises and engage constructively on the significant challenges ahead.
We must all remember the pensions system is not a set of Lego that can be dismantled and rebuilt every day and I would hope in the important debate you have here today, including from the Pensions Minister and his Shadow, we have a considered and thoughtful view of the pros and cons of any further changes.