The chancellor is expected to make key announcements on the next stage of the Pensions Review to address pensions saving adequacy as part of her Mansion House speech next Tuesday July 15. RSM UK says while increasing pensions savings through auto-enrolment is essential, this will be challenging against the current backdrop of rising national insurance costs for employers, and an ongoing cost of living crisis for workers.

Ian Bell, Head of Pensions, RSM UK said:  “It’s widely recognised that the 8% of salary currently paid in through auto-enrolment is inadequate, and that, while this got auto-enrolment off the ground in 2012, it was always intended that an increase, perhaps to 12%, would be necessary to ensure people save enough for retirement. Where this will come from, with other budget constraints to consider, is unclear. While employers are already squeezed by the rise in employers’ national insurance contributions and the increased national minimum wage, employees are also feeling the pinch from the cost-of-living crisis.

“The timing of any increase in auto-enrolment contributions will be critical to its success, and the chancellor has little fiscal or economic headroom at present. Pushing too far too fast risks increasing opt out rates and undermining the success achieved in increasing pensions saving so far. We may therefore see any timeline for this particular issue pushed into the future, as businesses and workers could both struggle to absorb any short-term increased costs.

“As part of any review, we’d like to see greater consideration for self-employed people, who make up a growing percentage of the national workforce and who currently miss out on auto-enrolment. According to the IFS, only 20% of self-employed people earning over £10,000 a year currently save into a private pension, compared to 80% of employees.

“With little wiggle room the chancellor may end up setting a long timeline for any changes to auto-enrolment. As the current parliament is due to end in 2028, where will this leave any amendments? There was a cross-party approach taken to the introduction of auto-enrolment, and it would seem sensible to take a cross-party approach once again on any changes to it, to give certainty and protect the long-term interests of pensions savers.”