The Pensions and Lifetime Savings Association has welcomed commitment in the Conservative party manifesto to conduct a review on whether lower paid workers are being unfairly taxed on some auto-enrolment pensions.
This review will specifically look at the discrepancies between net pay arrangement and tax relief at source for workplace pensions.
The PLSA points out that is discrepancy means AE contributions for savers who earn between £10,000 and £12,500 are more expensive for those on net pay arrangements.
PLSA director of policy and research, Nigel Peaple says: “In our view this problem can be fixed by adjusting the data gathering system used by HMRC.”
He adds: “We are also pleased the Conservatives have pledged to reintroduce the Pension Schemes Bill which includes important measures to discourage reckless behaviour by a small minority of scheme sponsors, as well as a provision for the creation of a consumer-focused pensions dashboard.”
However while these measures were welcomed Peaple says he was disappointed that there weren’t further measures to build on the success of auto-enrolment.
“We are disappointed the manifesto does not include any commitments to extend the scope of pension automatic enrolment to include younger workers, or lower paid workers with multiple jobs, and the self-employed.
“The manifesto also fails to commit to raising the minimum contribution levels for automatic enrolment from the current level of 8 per cent.”
Peaple adds: “Less than 50 per cent of all savers are on track to achieve an adequate income in retirement as defined by the Pensions Commission, and for those who only have DC pensions, only 3 per cent of savers are likely to achieve this outcome.”
The PLSA’s Hitting The Target report recommended raising minimum automatic enrolment contributions to 12 per cent by 2030 with consideration given to moving to a 50/50 employer/employee split.
Peaple adds: “On the promise to ‘unlock’ pension scheme investment in scientific discoveries, the PLSA supports broadening access to different asset classes but cautions that schemes must retain the freedom to invest in suitable assets in line with members’ best interests and not be forced to take on inappropriate levels of investment risk.”