NOW:Pensions Outline A “Five Point Plan” For The New Pension Minister
The UK General Election is just a few months away and auto enrolment provider NOW:Pensions has released its plan for whoever takes up the role of pension minister.
NOW:Pensions applauded the work of the current government with respect to pensions, while making it clear that there is plenty more work still to be done. They felt there were several pressing issues for whoever is in the role of pension minister this May and they let us all know what they were. We’ve summarised them for you right here.
1. To remove ‘qualifying earnings’ so that 8% is actually 8%
NOW:Pensions wants to remove the auto enrolment qualifying earnings rule that means the first £5,772 of any eligible worker’s salary is not included in the contributions calculation. That means that many workers think the 8% they are contributing is on their whole salary when in actual fact it is 8% of their whole salary minus £5,772.
2. To see low earners benefit from automatic enrolment
Auto enrolment is restricted to those earning more than £10,000 in the one job and NOW:Pensions is pushing for that threshold to be reduced so that more people can benefit. They point out that many low-earners actually make over £10,000 in a year but only because they have several jobs, which means they won’t be enrolled in any auto enrolment scheme.
3. To establish a cross party consensus on automatic transfers
The auto enrolment provider has also called for action on the many small pension pots that are out there, with the desired aim of an automatic transfer system. NOW:Pensions points out that this will require cross-party consensus to come into force, but considers it a challenge worth tackling.
4. To give consideration to auto escalation
They have also called for “auto escalation” to come into force. This is a system whereby part of any pay increases are automatically added to pension contributions, with the aim of pushing the current 8% contribution level up. As with auto enrolment, workers can opt out of auto escalation but the idea is that fewer will do so.
5. To extend flexibility to younger generations
Finally, the auto enrolment provider has called for more flexibility for younger generations in order to incentivise saving. One idea they mention is the New Zealand system with which younger savers are allowed to make withdrawals from their savings pot before age 55 if they are making a deposit on a home or are seriously ill.