Majority of industry back extension of auto-enrolment age
Four in five of Society of Pension Professionals (SPP) members say the minimum age criterion for auto-enrolment (AE) should be dropped while two thirds also want it expanded to age 75.
Findings from the trade body's Simplifying auto-enrolment research paper - released 27 November - show strong criticism for the complexity of the AE exclusion of employees under 22 or over 75.
SPP members condemned the process and said it "requires complex ongoing monitoring requirements for employers" and "critically reduces the number of individuals who could be saving for retirement".
The 2005 Pension Commissioner's (PC) second report justified the rationale behind the current age restrictions and argued auto-enrolling young workers or older workers, who were more likely to work part-time, was likely to result in high levels of opting-out. It could also result in the creation of multiple unmanaged small pots which would increase employers' administration costs.
SPP respondents said legislation and experience "has moved matters on" now with small pots able to be taken easily and form an employer-funded tax-efficient savings vehicle, effectively eliminating the PC's upper age limit rationale.
The SPP added: "We suggest that removing the age criterion would be a key simplification [as] our membership survey showed. Removing the age criterion would go some way to simplify the assessment process for employers and providers, [also] opt-out rates for AE have generally been low, suggesting young people may not opt-out as initially envisaged.
"Any late saving for older people is still useful and still augments their benefits productively as flexi-access drawdown and uncrystallised funds pension lump sums are now option to take benefits."
SPP members surveyed also supported the extension of the opt-out window by up to three months after enrolment, and greater freedom to select a cyclical re-enrolment date.
Findings also show members support the proposal for discretion for employers to statutorily enrol any employee they deem appropriate and said that would also help simplify AE. Currently, many employers overlay a contractual enrolment process on top of AE so there is no need to separate those on low earnings or under 22.
Just 6% of SPP members were opposed to this additional discretion for employers, with many calling the overlay process "unnecessarily complex".
A total of 84% of those surveyed also said they support the idea that minimum employer contributions should increase from 3% to 6% of earnings over time.
The SPP said: "We note a sudden increase will likely result in a backlash, but believe the current requirements are unlikely to generate satisfactory outcomes for many.
"Employees could always opt out if such an enrolment was not suitable and it would avoid complications around contractual enrolment practices.
"What matters is not the distinction between contractually enrolled and statutorily auto-enrolled but simply that jobholders are enrolled under the most suitable and robust processes available."
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