Contribution rates for auto-enrolment must rise dramatically if they are to effective, NAPF chief executive Joanne Segars told delegates today.
In her keynote speech at the Manchester conference, Segars applauded the “green shoots of pension recovery” triggered by the successful introduction of auto-enrolment, but said the real challenges were still to be overcome.
“There aren’t many of us who think that the 8% contribution is enough to deliver a decent pension. It’s a good start and certainly better than zero, which is the reality for too many today,” said Segars. “But now we are going to have to brave up to this issue, as 12% or 15% are more commonly seen as being the right kinds of benchmarks.
“We need to start managing expectations now – and set the trajectory so that it is a gradual increase. This is the challenge for the next government – not the one after that or the one after that. I recognise that it is difficult to have these types of discussions, but we can’t dodge them.”
Segars used her speech to launch the NAPF’s Automatic Enrolment: One Year On report, which shows that employers back the reforms and employees are relieved to be saving. She said the signs suggested “we’re turning into a nation of pension savers, not pension shirkers”, adding that the schemes the NAPF had spoken to for the report said they had an extra 120,000 people saving for the first time, participation rates of 95% and lower than expected opt-out rates.
However, she said with most medium and smaller employers still to auto-enrol, the biggest challenges still lay ahead.
“Even the large schemes said the rules were too complex and can be a disincentive to do more than the statutory minimum,” Segars said. ” In this context, pensionable pay and qualifying earnings is a big issue. We don’t want small schemes to be so overwhelmed that they do things badly – or not at all – with risk of high opt-out levels.
“We need a re-think on the appropriateness of the current rules and regulations in the light of this experience.”
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