The three wise men pass judgement on auto-enrolment

Delegates at our annual Pensions Trustee conference had the opportunity to ask questions of three experts with decades of experience - Peter Askins, director at Independent Trustee Services, Robin Ellison, consultant at Pinsent Masons and our very own senior consultant Malcolm Mclean.

The most interesting response the audience heard was the panel members’ opinion on auto-enrolment which can be summed up as hot, cold and lukewarm.

McLean described it a “fantastic” success for getting people into the habit of saving and called for it to be improved with higher contributions to deliver the sort of pensions people expect or need.

For Askins, however, the low savings rates meant the damage had been done and that it should not be described as pension provision. “It is a good savings scheme for the low paid because they can get better interest rates than saving in the post office or an ISA,” he said. “But rates of contribution can never deliver a reasonable pension outcome.”

Controversially, Ellison described auto-enrolment as pointless and misconceived. His principle objection was that it was an overly complex and expensive system that would not deliver very much for the public.

“We should put that auto-enrolment money into the State Pension and not try to affect an astonishingly complex system for relatively modest amounts of money.” He cited that of all accounts in the system so far around 30-40 percent were already closed.

McLean rebutted Ellison’s criticism by pointing out that if anything auto-enrolment was needed now more than ever, given that the Cridland Review was likely to lead to a rise in the State Pension Age. Auto-enrolment, he said, would allow people the chance to take a pension income at an age that suits them.

McLean expressed disappointment that there was no alternative to higher State Pension ages. Consequently, he said, the Government would need to place greater emphasis on the need for the public to save more into private pension provision.

Askins, however, called for people to work longer. He said improvements in mortality made a nonsense of setting the State Pension at age 65. When this age had been set in 1947, he pointed out average male life expectancy was 61.  

“The improvement in mortality means keeping the State Pension age at the same level we had it in 1947 is a nonsense and we are living proof of that,” he said gesturing to the panel in a moment of dry irony.