Chancellor Philip Hammond missed the opportunity to give households more financial support ahead of upcoming increases to the amounts workers will be paying into their workplace pension.
In April 2018, the amounts employees will need to pay into their workplace pension, under auto-enrolment rules will rise from 1% to 3% of their qualifying salary.
Workers are signed up to these pensions automatically by their employer and pay in contributions from their own salary which are boosted by payments from their employer and government tax relief. If they do not want to be part of the scheme they have to opt out.
In a bid to help workers build bigger pension pots, the amounts both employers and employees are being asked to pay is increasing.
Currently employees pay 1% and their employers pay 1% but in April next year this is rising to 3% for employees and 2% for employers. In April 2019 these will rise again to 5% for employees and 3% for employers.
‘Missed opportunity on pensions’
Steve Webb, director of policy at Royal London – and former pensions minister under the Tory-Lib Dem coalition – says: “In April next year millions of workers will be asked to put more money in their pension and it is vital that they do not opt out as a result. The Chancellor should have done more to support household incomes next April to soften the blow of the pension contribution increases.”
He adds: “Instead, his meagre inflation-linked increase in the tax free personal allowance means most people will still be out of pocket unless they get a pay rise. This is a missed opportunity at a crucial moment in UK pension policy.
Darren Philp, director of policy at The People’s Pension says he would have liked to have heard proposals from the Chancellor on how the auto-enrolment scheme can be made available to more savers – who either do not earn enough to qualify for the scheme or earn their income from more than one job.
He says: “It is also disappointing that with the auto-enrolment review approaching, the Chancellor missed the perfect opportunity to outline the government’s intent and show its commitment to the seven million people who are currently excluded from the scheme.”