Posted: 20 / 02 / 2018

Quite simply, no. There are only 15 months remaining until planned total contributions rise to 8% in April 2019.

It would not add any real impact on workers total pension pots over the long term and would only serve to upset the planned natural order for workers and employees.

Auto enrolment has been designed with “no barriers to entry” for workers, and so they only have to think of opting in or out, and so the process ultimately takes advantage of the fact that people are inherently lazy when it comes to actioning paperwork, and so opt out rates are typically very low at around 8%.

The majority of our clients have used phased contributions, sometimes with a starting 3% employer contribution, and we have seen opt out rates as low as 1% to 2% of total workforce. We may start to see secondary opt out increase when planned contributions rise from April 2019.

A better solution would be to increase the total contribution by 1% in 2020, and a further 1% in 2021, so that increases are staggered, and thus not upsetting the natural order, but with a beneficial impact on real long-term pension savings. How would this be funded?

Well, Corporation tax rates are due to reduce to 17%, and so I would suggest that the additional 2% be funded equally by employer and employee, with both sides benefitting from the respective tax reliefs.

Although this would not have a major impact for the older generation of workers who probably have some form of quality pension anyway, such as defined benefits, it would boost the savings of the younger generation who are not likely to have state pension income in their current form, due to aging population and how state pensions are funded (cash flow in from NI contributions/state pension payments out).