Enterprise and innovation are often the foundations of the social changes which have transformed society. It is vital that government takes this into account when considering how to shape and implement policy. And pensions are no different.
Government policy is most effective in collaboration with business, industry and the voluntary sector, and through this monthly column I intend to play my part in promoting a joined-up approach by ensuring that our policies and their reasoning are explained clearly. This will help to explain the crucial role that employers play in the successful delivery, for example, of automatic enrolment into workplace pensions.
The success of automatic enrolment shows how, when industry and government work together, social reforms that previously seemed too large and too complicated can be implemented and hugely successful and 1.1m employers across the UK have played a vital role in making sure that so many workers are now saving into workplace pensions.
The pensions industry is, in the main, working well. Recent statistics show that even after taking inflation into account pensioners’ average incomes have nearly doubled since 1994 – a combination of strong state provision and secure private pensions savings.
People in work are also saving more for later life, with workplace pension membership having risen to a record high of 73 per cent according to the Office for National Statistics.
The Triple Lock has protected state pension incomes for current pensioners, and automatic enrolment is transforming the way people save for later life in this country and has seen over 9.5 million people enrolled.
In 2012, 65 per cent of women employed full-time in the private sector did not have a workplace pension. By 2016 this had fallen to 31 per cent. Amongst eligible employees in the private sector, the workplace pension participation rate for women and men is now equal at 73 per cent.
We’ve gained the greatest ground on participation among younger workers and low earners who are embracing pension saving and almost seven in 10 eligible 22- to 29-year-olds working in the private sector are now enrolled in a workplace pension.
However, we can do more to make the pensions industry work for everyone. The consumer will always be at the heart of government policy and by empowering consumers we are supporting innovation and enterprise. Government policy is focused on trying to make the industry more open and accountable to the consumer and we will be doing this via three central policy areas.
Firstly, the Defined Benefit White Paper, published last month, will strengthen the powers of the Pensions Regulator. Although in the main the defined benefit pensions system is functioning well, for the small minority of cases where pension schemes are put at risk by irresponsible action or bad governance we will ensure that those individuals are held to account.
Second, the creation of the new Single Financial Guidance Body will empower the consumer and make accessing high quality, impartial information on your pension, finances and debt simpler. This new body will bring together the functions of existing providers under one roof.
Thirdly, we are working on testing targeted interventions to help self-employed people save towards their retirement. I recently attended an innovation event with the Association of British Insurers (ABI) and HM Treasury to explore how technology and existing financial products could be part of the solution and enabling self-employed people to build retirement savings for their later life.
The way people save for their retirement and interact with their pension is changing rapidly, but this is only the beginning of the journey and we will need work with banks, insurers and charities to ensure continued progress towards a more secure financial retirement for everyone.