TISA CALLS UPON THE DEPARTMENT FOR WORK AND PENSIONS TO ENSURE A SUFFICIENT RETIREMENT FOR ALL AHEAD OF SPRING STATEMENT
Ahead of the Spring Statement, The Investing and Saving Alliance (TISA), the cross-industry financial services membership body, is calling on the Department for Work and Pensions (DWP) to implement concrete policies that will meaningfully improve retirement outcomes. One of TISA’s ongoing objectives in retirement policy is to expand the scope of automatic enrolment (AE). This will ensure it remains relevant against a constantly evolving backdrop of working patterns, tax, and wealth.
The last official review of AE, commissioned by the DWP, took place in 2017. As a result, the DWP agreed to reduce the minimum age to 18 from 22 and remove the lower earnings limit, so that enrolled employees receive a pension contribution from their first £1 of earnings. The DWP agreed to implement the required changes in the mid-2020s, but without a statutory commitment, leaving uncertainty for both employers and employees.
TISA calls on the Government to place the agreed changes to AE into legislation. This would ensure employers and employees have greater clarity around when and how these changes will be implemented to save sufficiently for their retirement.
Several years have passed since the last review of AE was conducted. There is now more awareness, amongst the DWP and industry, that the 8% contribution level will not, in isolation, provide consumers an adequate replacement income in retirement. Consumers are, however, left unaware of their AE shortfalls.
There is also a wider industry awareness of the issues and anomalies that AE causes for lower earners. Covid has impacted the finances of millions of consumers. We must ensure the Government’s AE framework delivers adequate consumer outcomes. It is vital that it is regularly reviewed against a constantly changing landscape of personal wealth, working patterns and tax.
Although TISA believes now is not the right time to lift AE contribution levels, given the current cost of living crisis, it is vital that a second review of AE commences without delay. There will be a lengthy time required for any future changes to be agreed, communicated, and implemented.
TISA are calling on the Government to support a second review of AE and for the remit of that review to include the impact that AE has on lower earners. We need to ensure that additional flexibilities for this cohort can be explored to guarantee everyone is able to save sufficiently for their retirement.
Renny Biggins, Head of Retirement at TISA said: “The COVID-19 pandemic has had a significant impact on employer and employee finances. However, while we recognise the tough short-term circumstances, a review into AE contribution levels should be conducted without delay.
“We believe that these proposals should be placed in legislation no later than 2022 and be implemented no later than 2025. This recognises the significant impact that COVID-19 has had on employee and employer finances while allowing time to recover from the current cost of living crisis. It would ensure adequate time for employers and employees to prepare for these significant changes, while providing the crucial certainty that they will be brought into legislation.
“Given the recent surge in part-time working, a review into the earnings trigger band of £10,000 will help us understand whether it is appropriate to reduce this and bring more employees into AE.”
-ENDS-
For more information:
Kuba Stawiski
Cicero/AMO
020 7343 1600 or 0785 603 1906
kuba.stawiski@cicero-group.com
Notes for Editors
The Investing and Saving Alliance (TISA) is a unique, rapidly growing membership organisation for UK financial services.
Our ambition is to improve the financial wellbeing of all UK consumers. We do this by focusing the convening the power of our broad industry membership base around the key issues to deliver practical solutionsand devise innovative, evidence-based strategic proposals for government, policy makers and regulators that address major consumer issues.
TISA membership is representative of all sectors of the financial services industry. We have over 200-member firms involved in the supply and distribution of savings, investment products and associated services, including the UK’s major investment managers, retail banks, online platforms, insurance companies, pension providers, distributors, building societies, wealth managers, third party administrators, Fintech businesses, financial consultants, financial advisers, industry infrastructure providers and stockbrokers.
As consumers, the financial services industry and the economy react to and recover from the effects of the pandemic, the importance of the three key pillars of work that TISA prioritises has never been more apparent:
- Strategic policy initiatives that influence policymakers regarding the financial wellbeing of UK consumers & thereby enhancing the environment within which the industry operates in the key areas of consumer guidance, retirement planning, later lifetime lending, vulnerable customers, financial education, savings and investments.
- TISA is recognised for the expert technical support provided to members on a range of operational and regulatory issues targeted at improving infrastructure and processes, establishing standards of good practice and the interpretation and implementation of new rules and regulations covering MiFID II, CASS, ESG/RSI, operational resilience, Cyber Risk, SM&CR and a range of other areas.
- Digital transformation initiatives that are driving ground-breaking innovation and the development of industry infrastructure for greater operational effectiveness and revenue promoting opportunity for firms. TISA has become a major industry delivery organisation for consumer focused, digital industry infrastructure initiatives – TISAtech (a digital marketplace that brings together financial institutions and FinTechs for greater collaboration and innovation) and TURN (TISA Universal Reporting Network – a digital platform providing a secure data exchange for financial services using blockchain technology) – alongside projects Digital ID and Open Savings & Investment. This reflects TISA’s commitment to open standards and independent governance.