Pensions minister confirms support for auto-enrolment expansion, CDC

All industry stakeholders need to rally round and support efforts to improve the pensions sector, Maynard said in his speech at the Pensions and Lifetime Savings Association (PLSA) investment conference in Edinburgh.

“It isn’t just what I choose to say here, at a dispatch box in the Commons, or in the media,” he said. “It’s the heart, behind the scenes, the hidden wiring, the plumbing, that will make all of this work.

“So I want to make sure that we continue to do what is right to change the industry for the better.”

The minister expressed his support for the extension of auto-enrolment as part of an “ambitious set of reforms”.

Auto-enrolment has added more than 11 million workers at more than 2.2 million employers to workplace pensions since it was introduced, according to official data.

The proportion of women saving for a pension in the private sector has more than doubled from 40% to 88% by 2022, while the number of younger people aged 22 to 29 saving for a pension has increased by 60%, said Maynard, who wants to build on this success.

“We will lower the eligible age, removing the lower savings limit, so the contributions are payable for the first pound of earnings,” the minister stated – although he added that consultation was required in order to determine how and when this will be enacted.

The government has legislated to allow workers aged between 18 and 22 to be automatically enrolled into workplace pension schemes, as well as removing the lower earnings limit to enable people on lower wages to save for retirement.

However, a review from the Department for Work and Pensions published at the start of February opted not to implement these changes.

CDC and consolidation

Maynard said he was also keen to offer trustees more options and is progressing the development of collective defined contribution (CDC) schemes.

“CDCs can, in theory, provide better returns for savers on average, allowing them to remain in high growth assets for longer and helping drive economic growth,” he said.

“At the same time, they offer members who are shorter to irregular income in retirement and more predictable outcomes.”

Maynard accepted that there was more work to be done and further consultation required, but added that he was “currently developing the evidence to help inform the policy on those decisions”.

The minister also flagged the government’s decision to move forward with a small pot consolidator, channelling them into a small number of authorised default schemes. Maynard said he was moving his focus onto its delivery.

“It needs to be cost effective, it needs to be efficient, but it also needs to do what it says on the tin and consolidate those small pots,” said Maynard.

“I also want to find new ways to help strengthen and increase the value of the £1.4 trillion in defined benefit pension schemes,” he added, referring to the announced consultation on options for defined benefit schemes.

Dashboards

Finally, Maynard emphasised the need for savers to be able to make informed choices and how it was now more important than ever for people to fully understand their pension and financial security in later life.

This is the role dashboards will play, he said, as they were “critical” to changing how savers plan for their retirement. Once people view their pension information – including the state pension – all in one place online, they will be able to draw conclusions and make decisions.

While they may need assistance to properly understand the choices before them, the dashboard system will put more power in an individual’s hands, said Maynard.

“I know that our collective commitment to delivering dashboards is shared across the pensions industry,” he added. “So I urge all pension schemes and other providers to get that data ready ahead of connection.”