Recommendations & Conclusions
22 items
1
Recommendation
Third Report - Protecting pension saver…
Acknowledged
The Government has not acted on our recommendation to set a target of at least 60% for the combined use of Pension Wise and paid for advice when accessing pension pots for the first time. It also rejected our recommendation for a trial of automatic Pension Wise appointments, saying it …
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The Government has not acted on our recommendation to set a target of at least 60% for the combined use of Pension Wise and paid for advice when accessing pension pots for the first time. It also rejected our recommendation for a trial of automatic Pension Wise appointments, saying it would consider whether further interventions were needed, based on its assessment of the ‘stronger nudge.’ We remain concerned that the stronger nudge will not be enough to make take-up of Pension Wise ‘the norm’ and that neither DWP or MaPS have set metrics by which to judge its success, whether in terms of take-up of appointments or the effectiveness of the intervention. We are also concerned that a review in 2024, as suggested by the former Minister, will be too late given the time that it would take to trial and then implement any alternative solution. We recommend that by March 2023, DWP, the FCA and MaPS publish the metrics they intend to use for evaluating the stronger nudge. These should cover issues including take-up, the timing and the extent of behaviour change resulting from it. The evaluation should be completed no later than the end of July 2023. In addition, DWP should commission research to look at other initiatives trialled in the meantime, such as automatic appointments. (Paragraph 13) Are people saving enough?
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Government response AI summary
The government is committed to monitoring the use of Pension Wise and the impact of the Stronger Nudge, using metrics such as the volume of appointments attended and FCA Retirement Income data. They will continue to gather evidence and insight to support individuals in making …
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Department for Work and Pensions
2
Conclusion
Third Report - Protecting pension saver…
Acknowledged
Many newly auto-enrolled people make minimum contributions, not realising that this will not be enough to give them an adequate living standard in retirement. The Pensions Commission designed auto-enrolment to get median earners part of the way to its definition of retirement adequacy, with the expectation that they would make …
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Many newly auto-enrolled people make minimum contributions, not realising that this will not be enough to give them an adequate living standard in retirement. The Pensions Commission designed auto-enrolment to get median earners part of the way to its definition of retirement adequacy, with the expectation that they would make additional voluntary savings on top. However, largely they have not done so. Recent analysis by the Pensions Policy Institute for B&CE showed that only 39% of households and 37% of individuals are on track to hit the target replacement rates used by the Pensions Commission to benchmark adequacy. A group at particular risk, is people in their forties and older who do not have access to a defined benefit pension (a pension that pays benefits based on salary and length of service) and have had limited time to build up a pension through auto-enrolment.
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Government response AI summary
The government is committed to carrying out further analysis to measure the adequacy of retirement incomes for current savers, and will provide an update of their analysis as soon as the data is available. They consider that a collection of measures provides a greater range …
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Department for Work and Pensions
3
Recommendation
Third Report - Protecting pension saver…
Acknowledged
Although there are two commonly used measures of adequacy, there is currently no consensus in support of a single definition or what target the system should aim to achieve. We heard that building a new consensus on this—involving employers, trade unions, politicians, the wider public and the pensions industry—would be …
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Although there are two commonly used measures of adequacy, there is currently no consensus in support of a single definition or what target the system should aim to achieve. We heard that building a new consensus on this—involving employers, trade unions, politicians, the wider public and the pensions industry—would be essential to gaining support for any reforms to address the problem of under-saving. We recommend that, by March 2023, the Government should set out its plans to build a new consensus on what an adequate income in retirement is and what the pensions system should be designed to achieve. (Paragraph 27) The 2017 review
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Government response AI summary
The government is committed to carrying out further analysis to measure the adequacy of retirement incomes for current savers, and believes a collection of measures, based on different methodology, provides a greater range of insight, than a single measure alone.
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Department for Work and Pensions
4
Recommendation
Third Report - Protecting pension saver…
Deferred
We support the former Pensions Minister’s continued commitment to introducing the recommendations of the 2017 auto-enrolment review by the mid-2020s. It is Protecting pension savers – five years on from the pension freedomss Saving for later life 55 disappointing that five years on, we have seen no implementation plan or …
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We support the former Pensions Minister’s continued commitment to introducing the recommendations of the 2017 auto-enrolment review by the mid-2020s. It is Protecting pension savers – five years on from the pension freedomss Saving for later life 55 disappointing that five years on, we have seen no implementation plan or impact assessment. There is almost universal support for these recommendations, which would improve retirement outcomes for many part-time workers, disproportionately women, and for workers in the gig economy. The former Pensions Minister told us he had a two or three clause bill ready to make the necessary changes to legislation. We recommend the Government introduce the necessary legislation no later than the beginning of the next session of Parliament. It must also publish a timetable for consultation on implementation, taking account of cost pressures on employers and workers. (Paragraph 35) The minimum contribution rates
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Government response AI summary
The government remains committed to implementing the 2017 Review ambitions in the mid-2020s and aims to bring forward legislation at a suitable opportunity, with a consultation to ensure effective implementation.
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Department for Work and Pensions
5
Recommendation
Third Report - Protecting pension saver…
Acknowledged
There is a consensus that many people need to increase their pension contributions if they are to have an adequate income in retirement. Many told us that minimum contribution rates needed to increase above 8% if this was to happen. We welcome the former Pensions Minister’s aspiration to work towards …
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There is a consensus that many people need to increase their pension contributions if they are to have an adequate income in retirement. Many told us that minimum contribution rates needed to increase above 8% if this was to happen. We welcome the former Pensions Minister’s aspiration to work towards a 12% minimum contribution rate, as in Australia. There are good arguments for starting with an increase in employer contributions to 5%, level with employees. And any move to increase contributions should aim to increase pension saving for the right people at the right time. We welcome the fact that DWP is doing research to understand the impact on low earners.
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Government response AI summary
The government acknowledges that current contribution rates may not be adequate but states that its priority is to implement the 2017 Review measures in the mid-2020s and explore ways to prompt savers to engage with their pensions.
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Department for Work and Pensions
6
Recommendation
Third Report - Protecting pension saver…
Deferred
The middle of a cost of living crisis is not the time to ask people to pay more into their pension. However, if they are to do so in future, work to prepare the ground needs to start now to build consensus on the need for change among employers and …
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The middle of a cost of living crisis is not the time to ask people to pay more into their pension. However, if they are to do so in future, work to prepare the ground needs to start now to build consensus on the need for change among employers and the wider public. As a first step, the Government should say whether it considers an increase in minimum contributions possible in the foreseeable future. If not, it should explain how it intends to address the challenge of many people being on course for retirement incomes they will not think adequate.
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Government response AI summary
The government is focused on economic stability and growth, and the next step for Automatic Enrolment is the implementation of the 2017 Review measures in the mid-2020s before looking at further changes. They are continuing to explore how to prompt savers to engage with their …
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Department for Work and Pensions
7
Recommendation
Third Report - Protecting pension saver…
Deferred
In addition to any increase in the statutory minimum, we have been persuaded that there is scope to expand the use of targeted ways to improve outcomes or increase contributions. We recommend the Government commit to a trial of auto-escalation schemes, such as Save More Tomorrow (where people commit in …
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In addition to any increase in the statutory minimum, we have been persuaded that there is scope to expand the use of targeted ways to improve outcomes or increase contributions. We recommend the Government commit to a trial of auto-escalation schemes, such as Save More Tomorrow (where people commit in advance to paying part of future salary increases into their pension), with a view to understanding how the use of such schemes might be extended to a wider range of savers and employers.
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Government response AI summary
The government is focused on economic stability and growth, and will implement the 2017 Review measures in the mid-2020s as the next step for Automatic Enrolment before looking at further changes like auto-escalation schemes.
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Department for Work and Pensions
8
Recommendation
Third Report - Protecting pension saver…
Accepted
People in generation X and older without access Defined Benefit pension saving will have had limited time to build up pension savings through auto-enrolment and are therefore at risk of not hitting their retirement adequacy targets. We recommend the Government should consult on a plan to address this challenge and …
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People in generation X and older without access Defined Benefit pension saving will have had limited time to build up pension savings through auto-enrolment and are therefore at risk of not hitting their retirement adequacy targets. We recommend the Government should consult on a plan to address this challenge and report back to us by March 2023. According to the Office for National Statistics, almost a third of working age people do not expect to have any pension provision beyond the State Pension when they retire. We recommend the Government should consult on a plan to address this challenge and report back to us by March 2023. According to the Office for National Statistics, almost a third of working age people do not expect to have any pension provision beyond the State Pension when they retire. Given the importance of the State Pension to the retirement income of many people, we 56 Protecting pension savers – five years on from the pension freedomss Saving for later life recommend the Government should expressly commit to the continuation of the triple lock. (Paragraph 59) Self-employed people
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Government response AI summary
The government does not believe now is the right time to consult and has taken steps to address this challenge, including introducing the new state pension, providing further information and guidance to savers, and considering how to consolidate small pots.
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Department for Work and Pensions
9
Recommendation
Third Report - Protecting pension saver…
Acknowledged
The number of self-employed people saving in a pension has declined since the late1990s when it was around 48%, to around 16%. This is in stark contrast to the 88% of workers eligible for auto-enrolment participating in pension saving. Trials to encourage self-employed people into pension saving have not been …
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The number of self-employed people saving in a pension has declined since the late1990s when it was around 48%, to around 16%. This is in stark contrast to the 88% of workers eligible for auto-enrolment participating in pension saving. Trials to encourage self-employed people into pension saving have not been effective. The former Minister for Pensions told us that the “lessons of automatic enrolment are that default is the only way to get big interventions” and that the aim was to trial this once Making Tax Digital was up and running. The employer contribution has also been key to the success of auto-enrolment for employees, providing an incentive to participate. We recommend that HM Treasury and DWP work together to: (a) set a date to trial ways to default self-employed people into pension saving and; (b) consult on the proposal to increase the main rate of National Insurance paid by the self-employed (Class 4) by 3%, with the option to have the increase paid into a pension if the self-employed person also contributes 5% (including tax relief). Alongside that, the Government should consider how to promote pension saving to self-employed people. (Paragraph 74) Gig economy workers
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Government response AI summary
The government is committed to making retirement saving simpler for self-employed people and is working with Nest Insight on trials using financial digital platforms to test tech-based nudges. DWP is working with BASDA to explore opportunities to support self-employed people save for their retirement.
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Department for Work and Pensions
10
Recommendation
Third Report - Protecting pension saver…
Acknowledged
We are concerned that many people working in the gig economy may be missing out on their right as a worker to build up a pension through auto-enrolment. The Pensions Regulator (TPR) told us it faces considerable challenges in enforcement, with employers challenging its decisions at every stage and having …
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We are concerned that many people working in the gig economy may be missing out on their right as a worker to build up a pension through auto-enrolment. The Pensions Regulator (TPR) told us it faces considerable challenges in enforcement, with employers challenging its decisions at every stage and having to meet a high evidential burden at tribunals. The Department for Business, Energy and Industrial Strategy issued guidance on 26 July 2022, bringing together existing case law. TPR told us that while this new guidance would be helpful to refer to in its discussions with employers and at tribunals, it would still need to evaluate decisions from employers on a case-by-case basis and argue its case at tribunal. We heard from Uber and the GMB that better enforcement arrangements are needed to ensure workers get their pension rights. We repeat the recommendation made in two previous reports that the Government should bring forward an Employment Bill for parliamentary scrutiny as soon as possible to increase the legal protection available to people in low-paid work and the gig economy. In the meantime, we recommend that DWP should work with TPR to estimate how many people working in the gig economy should be classed as workers and what resources or powers TPR needs to be able to ensure employers in the sector comply with their auto-enrolment duties. They should report back to us by March 2023.
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Government response AI summary
The government will continue to work with TPR and BEIS on the gig economy issue, noting that many workers are already eligible for auto-enrolment, and BEIS continues to explore options for collecting data on labour market trends.
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Department for Work and Pensions
11
Recommendation
Third Report - Protecting pension saver…
Accepted
We support TPR’s efforts to encourage gig economy employers to offer pensions to those workers who do not come under the definition in the Pensions Act 2008. We recommend that DWP explore what steps could be taken to support this, including through the development of sectoral pension schemes, available to …
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We support TPR’s efforts to encourage gig economy employers to offer pensions to those workers who do not come under the definition in the Pensions Act 2008. We recommend that DWP explore what steps could be taken to support this, including through the development of sectoral pension schemes, available to any employer in a sector that wants to use it. (Paragraph 88) Protecting pension savers – five years on from the pension freedomss Saving for later life 57 The gender pensions gap
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Government response AI summary
The government believes the definition of jobholder in the AE legislation is clear and does not need to be altered, with gig economy workers who meet the definition already being brought within the scope of AE through the Pensions Regulator's compliance work and clarified guidance …
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Department for Work and Pensions
12
Recommendation
Third Report - Protecting pension saver…
Acknowledged
There is no consensus on how gender pension gap should be defined or any target to reduce it. Reports produced by stakeholders to inform the debate suggest the gap is significant and that little sustained progress is being made to reduce it. We recommend that the Department for Work and …
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There is no consensus on how gender pension gap should be defined or any target to reduce it. Reports produced by stakeholders to inform the debate suggest the gap is significant and that little sustained progress is being made to reduce it. We recommend that the Department for Work and Pensions work with colleagues across government and other stakeholders to agree a definition of the gender pension gap and a target to reduce it.
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Government response AI summary
DWP continues to work with stakeholders across government to develop an appropriate definition of the gender pensions gap and build an evidence base to inform future policy outcomes.
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Department for Work and Pensions
13
Recommendation
Third Report - Protecting pension saver…
Acknowledged
We recommend the Government consider the case for a carer’s credit, for example, to their auto-enrolment pension. If it chooses not to do so, it must explain its alternative plan to address the gender pension gap mainly caused by labour market inequalities.
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We recommend the Government consider the case for a carer’s credit, for example, to their auto-enrolment pension. If it chooses not to do so, it must explain its alternative plan to address the gender pension gap mainly caused by labour market inequalities.
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Government response AI summary
The government is committed to continually monitor the use of Pension Wise which now includes the impact of the Stronger Nudge, and will continue to work with MaPS to consider feedback on users’ experience of the service and its impact on their knowledge of the …
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Department for Work and Pensions
14
Recommendation
Third Report - Protecting pension saver…
Deferred
We heard that the level at which the auto-enrolment earnings trigger is set (£10,000) currently excludes too many people, with the result that they miss out on employer contributions and tax relief. We heard calls for it to be reduced or removed. We also heard that any such decision needed …
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We heard that the level at which the auto-enrolment earnings trigger is set (£10,000) currently excludes too many people, with the result that they miss out on employer contributions and tax relief. We heard calls for it to be reduced or removed. We also heard that any such decision needed to be informed by a better understanding of the circumstances of low earners and the likely impact of any change on them. DWP plans to publish research in early 2023 which may help inform this. Following publication of this research, DWP should write to us setting out a timetable to review the level at which the earnings trigger is set and, if it is unable to do so, explain what action it intends to take to address the exclusion of low earners from auto-enrolment. We also recommend that DWP and HM Treasury continue to explore ways to bring multiple jobholders within the scope or auto-enrolment, for example, by amending the PAYE coding notice system to add an instruction to auto-enrol.
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Government response AI summary
The government remains committed to the implementation of the 2017 Review ambitions in the mid-2020s, aiming to bring forward legislation at a suitable opportunity and when parliamentary time allows, and will consult on the implementation of the review.
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Department for Work and Pensions
15
Recommendation
Third Report - Protecting pension saver…
Not Addressed
We welcome the Government’s recognition of the importance of addressing the fact that some low earners (disproportionately women) miss out on tax relief because their pension scheme uses the ‘net pay’ arrangement for tax relief. Given this is a long-standing concern, it is disappointing that the first payments will not …
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We welcome the Government’s recognition of the importance of addressing the fact that some low earners (disproportionately women) miss out on tax relief because their pension scheme uses the ‘net pay’ arrangement for tax relief. Given this is a long-standing concern, it is disappointing that the first payments will not be made until 2025/26 and that those eligible will have to take action to receive payment. We recommend HM Treasury consider whether payments can be brought forward and, if not, whether arrangements can be put in place for backdating payments, at least to 2021/22, when the plans to equalise outcomes for low earning pension savers were first announced. We urge the Government to set out its strategy for maximising take-up and explain how it will work with stakeholder organisations on this.
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Government response AI summary
HMRC is not actively considering automatically enrolling the self- employed via the NICs system because their systems are not designed to collect or administer pension contributions, and it would present a significant challenge as new systems would be required.
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Department for Work and Pensions
16
Recommendation
Third Report - Protecting pension saver…
Acknowledged
Divorced women’s pensions are much lower than those of men. There appear to be no reliable, regularly reported statistics on the number of pension sharing orders made on divorce. Research indicates that it may be as low as 5% of divorces. As a first step towards a strategy to improve …
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Divorced women’s pensions are much lower than those of men. There appear to be no reliable, regularly reported statistics on the number of pension sharing orders made on divorce. Research indicates that it may be as low as 5% of divorces. As a first step towards a strategy to improve take-up of pension sharing on divorce, we recommend that DWP work with the Ministry of Justice and experts in the area to produce regular and reliable statistics on pension sharing orders. It should report to us on its plans for this by March 2023.
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Government response AI summary
The government welcomes having regular and reliable statistics on pension sharing in principle and will engage with HMCTS to understand the barriers to producing and publishing such statistics.
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Department for Work and Pensions
17
Recommendation
Third Report - Protecting pension saver…
Acknowledged
Almost half a million people have stopped claiming Child Benefit since 2013 to avoid the High Income Child Benefit charge. We recommend that DWP explain what arrangements it intends to put in place to ensure this does not have a detrimental impact on their State Pension entitlement. (Paragraph 117) 58 …
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Almost half a million people have stopped claiming Child Benefit since 2013 to avoid the High Income Child Benefit charge. We recommend that DWP explain what arrangements it intends to put in place to ensure this does not have a detrimental impact on their State Pension entitlement. (Paragraph 117) 58 Protecting pension savers – five years on from the pension freedomss Saving for later life Guidance
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Government response AI summary
The government has encouraged families who are responsible for a child under 12 to claim Child Benefit regardless of household income to help them build qualifying years of National Insurance for future State Pension entitlement and will keep this under review. Information on what parents …
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Department for Work and Pensions
18
Recommendation
Third Report - Protecting pension saver…
Acknowledged
MaPS Chief Executive, Caroline Siarkiewicz, told us that the biggest challenge was working out how to help people understand their options and choices, “bearing in mind the huge numbers of people who do not know where to go for that.” MoneyHelper Pensions guidance is an important service, able to help …
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MaPS Chief Executive, Caroline Siarkiewicz, told us that the biggest challenge was working out how to help people understand their options and choices, “bearing in mind the huge numbers of people who do not know where to go for that.” MoneyHelper Pensions guidance is an important service, able to help people engage with their pensions and support them with decision-making at important points such as divorce. MaPS has capacity to deliver 205,000 such pensions guidance sessions this year. It is not clear whether this is optimum or whether more people could benefit from the service if there was a concerted effort to increase take-up. We recommend that DWP and MaPS consider how the mechanisms available to increase take-up of Pension Wise—signposting requirements and a dedicated media and marketing budget—could be applied to MoneyHelper Pensions. MaPS should explain the role it expects its pensions guidance services to play in meeting its goal to have 5 million more people understanding enough to plan for and in later life by 2030. It should also explain how it plans to work with employers to ensure they play their part in meeting this goal.
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Government response AI summary
The government supports appropriate marketing of guidance services, including MoneyHelper Pensions, subject to scrutiny. They are exploring further options for encouraging the use of guidance, and MaPS's Pension Guidance Transformation Strategy will improve triage and transfers between the services.
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Department for Work and Pensions
19
Recommendation
Third Report - Protecting pension saver…
Deferred
We heard that concerns about stepping over the boundary from guidance into advice continue to constrain the support that pension schemes and employers can provide to savers. The regulators are working with pension schemes and providers to better understand these concerns and to gather practical examples of where this is …
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We heard that concerns about stepping over the boundary from guidance into advice continue to constrain the support that pension schemes and employers can provide to savers. The regulators are working with pension schemes and providers to better understand these concerns and to gather practical examples of where this is causing a problem. We recommend DWP and the FCA report to us on progress in clarifying the boundary between advice and guidance by March 2023.
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Government response AI summary
The government redirects the recommendation to the FCA, stating they lead on the provision of financial advice and have provided a separate response.
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Department for Work and Pensions
20
Recommendation
Third Report - Protecting pension saver…
Accepted
It is clearly important that pension schemes can provide pension scheme members who have been auto-enrolled with information and tools to help them engage with their pensions. We recommend that TPR report back to us by March 2023 on the progress that has been made in resolving concerns that the …
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It is clearly important that pension schemes can provide pension scheme members who have been auto-enrolled with information and tools to help them engage with their pensions. We recommend that TPR report back to us by March 2023 on the progress that has been made in resolving concerns that the Privacy and Electronic Communications Regulations prevent schemes from doing so.
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Government response AI summary
The government will report back to the Committee by March 2023 on the progress made in resolving concerns about Privacy and Electronic Communications Regulations preventing pension schemes from communicating with members, including engagement with the ICO and DCMS.
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Department for Work and Pensions
21
Conclusion
Third Report - Protecting pension saver…
Acknowledged
We welcome the work being done to improve engagement and support savers in making decisions while they save, for example, through the development of pensions dashboards and the Mid-Life MoT and simpler annual benefit statements. DWP, MaPS and the FCA should continue to explore ways that savers can be supported …
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We welcome the work being done to improve engagement and support savers in making decisions while they save, for example, through the development of pensions dashboards and the Mid-Life MoT and simpler annual benefit statements. DWP, MaPS and the FCA should continue to explore ways that savers can be supported to take control of their finances through information, education and support from pension schemes and employers. We also welcome the fact that, alongside this, initiatives are being progressed with the aim of improving outcomes for savers even if they do not engage, such as the development of a framework to help employers judge whether the scheme they have chosen for auto-enrolment represents good value for money for savers. As we said in our report on Accessing Pension Savings, there is demand for the further development of Collective Defined Contribution (CDC) schemes in future and it is right the Government continues to support this. We will return to look at these initiatives as they develop. (Paragraph 137) How to move forward
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Government response AI summary
The government will continue to help people become more informed savers, and are working closely with delivery partners to do so. The FCA has published rules for personal pension schemes, and are consulting on rules for dashboard operators.
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Department for Work and Pensions
22
Recommendation
Third Report - Protecting pension saver…
Rejected
We heard that there is a consensus that auto-enrolment has been successful in increasing participation in workplace pension saving but also that it is time to address the challenges which mean many people are unaware they are not saving enough for Protecting pension savers – five years on from the …
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We heard that there is a consensus that auto-enrolment has been successful in increasing participation in workplace pension saving but also that it is time to address the challenges which mean many people are unaware they are not saving enough for Protecting pension savers – five years on from the pension freedomss Saving for later life 59 an adequate income in retirement. There is a need to forge a consensus on the future direction, including employers, trade unions, the pensions industry and the wider public. This will require a cross-government commitment to develop a plan and build this consensus. In some areas—such as how to increase self-employed pension saving, ensure any future increase in contributions is well-targeted, and increase pension sharing on divorce—a better evidence base is needed to understand the issues. We recommend that the Government set up a new office tasked with: building and maintaining an evidence base; explaining the trade-offs involved in different policies; reporting regularly to Parliament on progress in meeting objectives relating to retirement adequacy and the gender pension gap. (Paragraph 141) 60 Protecting pension savers – five years on from the pension freedomss Saving for later life
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Government response AI summary
The government does not believe a new office is necessary, stating that the DWP already provides evidence and analysis, working closely with stakeholders.
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Department for Work and Pensions