Only those earning £10,000 a year or more should be automatically enrolled into Nest or qualifying pension schemes, according to the ABI.
In its response to the DWP’s consultation Making Auto-Enrolment Work the insurer body says those earning less should be allowed to opt in, but not be signed up automatically.
The ABI also says that the private sector is unlikely to be able to offer a replacement for Nest in the event the government decided not to go ahead with the project on a centralised basis. It also calls on the government to link contributions to all basic earnings and not just band earnings.
Consumer group Which? says the government should go ahead with Nest as planned, arguing that the public trust not-for-profit providers more than those in the private sector.
Maggie Craig, the ABI’s acting Director General says: “The ABI fully supports automatic enrolment into workplace pensions, which needs to be implemented without delay. This is vital to tackling the chronic lack of saving for retirement, and helping thousands of people avoid a dramatic drop in income and living standard when they retire. The insurance industry will continue to work with the Government to help make automatic enrolment a success, such as giving employers a simple method of certification for existing good pension schemes. However, as things stand, it is unlikely that the private pensions industry could replace Nest.”
“To make sure only those who can afford to save are included, only people earning £10,000 and over should be automatically enrolled. But those earning less should be allowed to opt-in.
“The Government needs to make it as easy as possible for employers who already contribute generously to good pension savings for their employees to continue to do so.
“This is why contributions should be based on basic earnings from £1 – not a complex formula. If the basic pay method is not used, it will result in many employers abandoning existing good pension schemes and contribution levels, and moving to the easy option of minimum mandatory contribution levels. If this happens, it risks resulting in many people saving less for retirement, not more.
“As things stand, it is unlikely that the private pensions industry could fill the gap if Nest did not go ahead. But we look forward to helping employers who want to offer their employees more generous pension arrangements than they can provide through Nest; and to helping the Government make automatic enrolment a success.”
Which? chief executive, Peter Vicary-Smith, says: “A trusted pension scheme that puts consumers first is the jewel in the crown of the 2012 reforms. Increasing the involvement of pension providers other than Nest would lead to higher charges and lower levels of trust, undermining efforts to encourage more people to save for a pension. The Government must continue to support Nest in its current form.”
