Reinforcing automatic enrolment

Report by: Centre for Policy Studies

Author(s): Michael Johnson

July 14, 2017

Ahead of the DWP review on Automatic Enrolment (AE), leading pensions expert Michael Johnson details 12 specific pension reforms in “Reinforcing Automatic Enrolment”. His recommendations are intended to:

• Give individuals a stronger sense of personal ownership over their savings;
• Ensure that the AE opt-out rate remains low;
• Broaden AE’s eligibility criteria particularly for lower earners and the self-employed;
• Increase the potential retirement income of lower earners;
• Incentivise contribution rates above the statutory minimums;
• Radically simplify the current pensions and savings system;
• Save the Treasury £10 billion a year.

Johnson argues that while Automatic Enrolment in workplace pension schemes has been a success, the Government can do more to encourage saving, especially among the young and the self-employed. This can be achieved by redistributing the current savings incentives, including scrapping all Income Tax relief and NICs rebates replacing them with a 50% bonus paid on the first £2,000 of post-tax contributions (paid by employee or employer), and 25% on the next £6,000 (i.e. an annual bonus cap of £2,500): in total, £10,500 per year, which is more than adequate.