We simply cannot afford to lose another decade or more debating what to do next.
Raising mandatory contributions risks triggering large-scale opt-outs, which would be self-defeating. But harnessing the power of inertia, getting people to gradually increase their contribution rate with each pay rise unless they actively opt out, would be a more gentle way of getting contributions up to more realistic levels. Detailed thinking in that area cannot come too soon.
All in all, it is a case of ‘two cheers’ for the 2017 review. It will address many important issues and I am sure will be done thoroughly and in good faith. But unless it tackles the inadequacy of current rates of pension contributions, it will fail to deal with the key item of unfinished business of automatic enrolment.
Sir Steve Webb is a former pensions minister and is currently director of policy at Royal London
Key Points
The review into auto-enrolment announced at the end of December will look at whether the £10,000 trigger for AE is set at the right level.
It is estimated that just one self-employed person in seven is contributing into a pension.
Raising mandatory contributions risks triggering large-scale opt-outs, which would be self-defeating.
