Ahead of the results of the automatic enrolment (AE) review, PP looks at what could come up.
The review, a government statutory obligation which will consider the success of AE to date and explore ways in which the policy can be further improved, includes three key themes:
Coverage, which is being headed by Standard Life head of pension strategy Jamie Jenkins; contribution rates, led by Pensions Policy Institute director Chris Curry; and engagement, which PTL non-executive chairman Ruston Smith is in charge of.
Although it is clear what areas are being considered, there has been no confirmation of any policy changes which will be recommended to the government for implementation, as the three chairmen have remained incredibly tight-lipped.
The Department for Work and Pensions (DWP) told PP yesterday that the AE review is set to come out next week.
Here are five things which could crop up:
1. The self-employed
A review of the existing coverage policy will take into consideration those who are currently excluded from AE.
In an exclusive interview with PP in October, Jenkins hinted towards including the self-employed in AE being one of the recommendations in the review.
It was noted that there was an overwhelming response from the industry that the AE review should consider this, and that most people said nobody should be excluded.
Nonetheless, at the Pension and Lifetime Savings Association (PLSA) conference in October, he explained although there is "agreement more people should be included, there is no consensus on who."
2.Earnings and age trigger
The earnings trigger to qualify for AE currently rests at £10,000, and the age criteria at which eligible workers are automatically enrolled is 22.
Although there is a yearly review of the earnings trigger and qualifying earnings band - as required from section 14 of the Pensions Act 2014, the review is also asking whether AE's remit is wide enough.
It will consider whether the minimum earnings and age trigger should be lowered, but there has been no confirmation of any planned changes.
PP previously reported many have noted how the current policy disproportionately affects female workers who are more likely to be in part-time employment. This is because these workers may not earn over the £10,000 trigger through multiple jobs, but do not qualify because the earnings in one job are not enough.
Furthermore, a previous study from Citizens Advice confirmed over 100,000 people with multiple jobs are missing out on AE, and there has been criticism of the current regime.
Aegon head of pensions Kate Smith previously told PP "the best way is to remove the earnings trigger and reduce the age threshold from 22 to 18-years-old," and Long agreed, but said the threshold should not be removed completely.
As it stands, there has been no confirmation of planned increases to contribution levels beyond minimum rates being raised to a total of 8% in 2019, with a minimum 3% employer contribution.
This is because the government wants to see how increasing contribution levels will affect the levels of opt-out rates first.
Nonetheless, many in the industry have argued contribution rate changes should be considered in the AE review, and the proposed rate to provide an adequate income in retirement often varies between 12% and 16%.
Former pensions minister Steve Webb argued contribution rate changes must be made in a "sense of urgency" and this should be considered as part of the review as they are still far too low.
4. Charge cap
In April 2015, the government introduced an annual 0.75% charge cap in the default fund as a means of improving value for money for members.
The review has been considering whether the cap, which covers all scheme administration and investment costs excluding transaction costs, should be lowered or extended to cover some/all transaction costs.
Pensions minister Guy Opperman confirmed there will not be any changes to the charge cap earlier this month in a written statement to parliament which said "we do not feel now is the right time to make changes to the cap, which is working broadly as intended."
However, this does not necessarily mean there will not be recommendations in the review for lowering the level of the 0.75% charge cap in the future.
The review will look into how to increase engagement with members so they can better understand their pensions, and maximise the pots they can get on retirement.
At the heart of AE is a reliance on inertia, and so it is part of the review's remit to consider how to better engage members.
At the PLSA conference in October, the importance of member engagement was highlighted by Ruston Smith, who said, "with so many distractions in life, it is important that messaging is clear, concise and standardised."
This is particularly true as, according to Smith, "the average person receives around 105,000 words of information every day."
The importance of removing pension jargon and using better language to communicate with members was also touched upon, but Smith did not suggest how this could be achieved.
This article was originally published on 4 December. It was updated with information on when the AE review will be published.
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