Businesses could be forced to pump more cash into their employees’ pensions in the coming years under proposals that will be considered by a pensions commission launching this week.
The commission will review auto-enrolment, which was set up in 2012 and requires 8 per cent of wages to be saved for a pension — 3 per cent from employers and 5 per cent from workers.
It will also look at how the poor savings rates of the young, the lower-paid, women and the self-employed can be improved.
A giant creature named “Workie” was unveiled by the government ten years ago as part of a campaign to raise awareness of workplace pensions
DEPARTMENT FOR WORK AND PENSIONS/PA
One of the members of the commission is likely to be Sir Ian Cheshire, the veteran business executive who was most recently chairman of Channel 4. The commission is expected to report to the government in 2027.
The launch of the commission is thought to be one of a number of reviews into pensions due this week, including a review into the state pension age, which is 66. The government is required to review the state pension age every six years and must do so by 2027.
While the pensions industry argues that the auto-enrolment rate should increase to 12 per cent, the government has made clear this will not happen in the current parliament.
The commission is expected to consider whether auto-enrolment should start earlier than the present age of 22. To be eligible, a person also has to be earning more than £10,000 a year. Government research shows that only 21 per cent of 18 to 21-year-olds are saving into pensions. For 22 to 29-year-olds, the figure rises to 86 per cent.
Lower-paid workers, on between £10,000 and £20,000, are also proportionately saving less than higher earners because of the way auto-enrolment is constructed, which means that they effectively save only 5.5 per cent of their earnings.
Torsten Bell, the pensions minister, said that under auto-enrolment ten million more people were saving than in 2012 but that more needed to be done
BELINDA JIAO/GETTY IMAGES
Auto-enrolment was one of the recommendations of a pensions commission set up by the previous Labour government. Without auto-enrolment, retirees would have to rely on a state pension of £10,000 a year.
Torsten Bell, the pensions minister, said that under auto-enrolment, ten million more people were saving than in 2012. “But the work isn’t finished, with too many missing out on saving towards retirement. By reviving the pensions commission 20 years on, we will finish the job and build a pensions landscape that delivers decent retirements for the many, not the few.”