Out-Law News | 13 Dec 2016 | 3:15 pm | 2 min. read
Tom Barton of Pinsent Masons, the law firm behind Out-Law.com, was commenting as the government confirmed the scope of the planned review of the flagship policy, which is due to take place next year. This review will consider how best to develop automatic enrolment so that as many people as possible save for their retirement, and will also incorporate the planned review of the 0.75% workplace pension charge cap and transaction costs.
Barton said that the four year period since the introduction of automatic enrolment had been one of "incessant change" for the pensions industry, much of which had been "driven by auto-enrolment".
"The basic premise is that if membership and saving/investing is pseudo-mandatory, then we need a robust system in place to make sure the auto-enrolment population is being looked after," he said. "The changes since 2012 have delivered just that."
"Price controls, independent governance and value-for-money assessments deliver a low cost, good value pension savings environment.," he said.
The fact that the review would also consider associated issues for workplace defined contribution (DC) pensions, such as the charge cap and transaction costs, was particularly significant, he added.
"Transaction costs and the providers of underlying investments will come under increasing pressure throughout 2017 from this policy review and work already underway by the Financial Conduct Authority (FCA)," he said.
Automatic enrolment began for the largest employers in October 2012, and is expected to lead to around 10 million people newly saving, or saving more, towards their retirement by 2018. The rules require employers to automatically enrol their workers into a DC pension scheme which meets certain minimum requirements, and to make contributions towards the pensions of workers that do not opt out of the scheme once enrolled.
A cap on member-borne management charges on default funds in DC schemes used for automatic enrolment, at 0.75% of funds under management, was introduced in April 2015. This cap does not currently include the transaction costs that result from the trading necessary to invest the assets paid into the pension scheme, although trustees and independent governance committees (IGCs) must report on these costs as part of their annual scheme value for money assessments. The FCA is currently consulting on a new requirement for asset managers to publish these costs in a standardised form.
Among the topics that will be considered by the government's review of automatic enrolment is whether, and if so how, to encourage those that do not qualify for automatic enrolment to save for their retirement. It will gather evidence on groups such as people with multiple jobs, who do not meet the earnings threshold for automatic enrolment in any single job, and the growing numbers of self-employed people, according to the government's announcement.
The government has also confirmed that it will freeze the 'trigger' earnings threshold for automatic enrolment at £10,000 for the 2017/18 tax year.
The review will be conducted by the Department for Work and Pensions (DWP), supported by an external group chaired by and made up of pensions industry experts and member and employer representatives. The government will announce the membership of and terms of reference for this group early next year, according to the announcement.
The review will report towards the end of next year, and the government does not expect to make any policy decisions during 2017, according to the announcement.