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Auto-enrolment review 2017 terms of reference

Today the DWP have published the terms of reference for the inaugural review of 2017 and announced the thresholds for 2017/18. Consultation for the 2017 auto-enrolment review will start in early 2017, with recommendations published in late 2017. No policy decision are expected in 2017.
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Today the DWP have published the terms of reference for the inaugural review of 2017 and announced the thresholds for 2017/18. Consultation for the 2017 auto-enrolment review will start in early 2017, with recommendations published in late 2017.  No policy decision are expected in 2017.

The review will consider the following; Those employees who are missing out – Over six million people have so far missed out on pension saving even though they work for employers who have auto-enrolled their staff.  These are chiefly those working part-time or with multiple jobs and on lower incomes. Accruing contributions – Currently it is not a requirement to receive pension contributions on the first £5,824 of earnings. This disproportionately impacts those with lower earnings.

Inclusion of the Self Employed – The self-employed number more than 4 million people and are rising, yet few are saving for retirement. Minimum contribution levels – These are currently 2 percent, will rise to 5 percent in 2018, before hitting 8 percent in 2019. The review will gather evidence for a future review of these minimum requirements. Encourage individuals to ‘own’ their retirement – The review will gather evidence as to how engagement with individuals can be improved so that savers have a stronger sense of personal ownership and are better enabled to maximise savings. Charge Cap – Currently default funds used for auto-enrolment can have a maximum annual charge of 0.75 percent. The review will look at if this should be lowered and if transaction costs should also be included: Smoothing out any untidy quirks; Ensuring alternative contribution structures remain appropriate;

Nathan Long – Senior Pension Analyst at Hargreaves Lansdown ‘The review into auto-enrolment looks to tackle the key issues that remain, with those missing out in the form of part-time and self-employed workers appearing to take centre stage. Dropping the level of annual earnings needed before being auto-enrolled from £10,000 and aligning to the New State Pension would help part-time workers, and the digital accounts look an appropriate way to include the self-employed. Whilst evidence around the level of minimum contribution is being sought, final decisions should not be made until the results of the planned increases to 5 percent in 2018 and 8 percent in 2019 are known. The DWP is also looking to understand how they can build on the renewed focus on workplace financial education to stimulate individual ownership of the path to retirement. Allowing employees to have their auto-enrolment contributions paid into their own choice of provider would give engagement levels a huge leg up.’

Auto-enrolment thresholds
The proposed auto-enrolment thresholds for 2017/18 are; £10,000 earnings trigger – the earnings at which you are automatically enrolled into your company pension is now unchanged since 2014/15; Contributions now begin accruing after the first £5,876 of earnings – up from  £5,824 in 2016/17; Contributions do not need to be paid on earnings in excess of £45,000 – up from £43,000 in 2016/17. Nathan Long – Senior Pension Analyst at Hargreaves Lansdown: ‘Retaining the earnings needed before you are automatically saving for a pension at £10,000 shows quite how aware policy makers are of the large numbers of low paid, part time workers who are missing out.”

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