“Although the actual pounds and pence difference in people’s pockets would be relatively modest, making this tweak when people are already financially struggling may prove unpopular.
“Automatic enrolment relies on inertia, and ideally you don’t want to force people to make the decision between income today and income in old age at a time like this.”
Employers disagree over contributions calculations
The government asked employers for their views on two prospective reforms to auto-enrolment. It found that 68 per cent of employers were in favour of lowering the age of auto-enrolment from 22 to 18, versus 17 per cent against.
Forty-three per cent of employers, meanwhile, were in favour of pension contributions being calculated from the first pound earned instead of the lower earnings threshold, with 37 per cent against.
These amendments have been mooted as solutions to closing the gender pensions gap, which stood at 55 per cent in 2021 for those at retirement, according to L&G.
Aegon head of pensions Kate Smith warned that the cost of living crisis could push savers to end their participation in occupational schemes, which would also impact employer provision. The opt out rate stood at 9 per cent in 2019, which is unchanged from its 2017 level.
“There’s a real risk that employees could be tempted to stop their pension contributions, as they make stressed financial decisions to make ends meet,” she said.
“This is likely to lead to employer contributions also stopping, so should be a last resort.”
Alex Janiaud is deputy editor at Pensions Expert
