Sorting out the nuts and bolts of auto-enrolment must be the government’s first step in getting people to save more, argues Gregg McClymont, head of retirement savings, Aberdeen Asset Management

Punch drunk from an avalanche of legislation, it would be natural for the pensions industry to say “no más”.

Alas that’s not how politics works. Displaying a sense of purpose is a sine qua non of political style. As Churchill once confessed “I only worry about inaction, not action”.


While the London bus approach to pensions (one Pensions Act after another) might be in retreat – viz. Baroness Altmann’s PLSA address, Government is not good at doing nothing. Nor, in the case of pensions, should it be.

Reconstructing the UK’s second – occupational – pensions pillar is a long-term endeavour. The Pensions Commission has laid the groundwork, but the project is far from complete.

The largest firms have successfully auto-enrolled their employees with low opt out rates but the hard yards are still to be run as 1.8 million smaller employers begin the process.

Government is not good at doing nothing. Nor, in the case of pensions, should it be.”

Successfully completing auto-enrolment with minimum complications for employer and employees is a pre-requisite of rebuilding confidence in occupational pensions.

If Government and industry don’t get it right at the beginning support for the project could begin draining away. (Anyone remember the Downing Street sponsored Beecroft review with its demand for removing small employers from auto-enrolment?)

Focusing on this process is therefore surely a sensible move by the new majority Conservative Government.

A further pressing matter should be automatic transfers”

It might not be sexy but calibrating the nuts and bolts of auto-enrolment, whether payroll, software, scheme quality criteria, charges or governance, should be the priority. So too should be the developing issue around “net pay” arrangements for those above the auto-enrolment threshold but below the income tax personal allowance of £10 600.

A further pressing matter should be automatic transfers. Only with a workable system to aggregate individual pots do other pieces of the auto-enrolment puzzle fall into place. Get this right and auto-escalation, mandation, and more widely encouraging higher contribution rates, can then become the basis of subsequent policy debate.

There are some reasons to be optimistic. Politicians are becoming more engaged with pensions, and more alive to its importance and complexity.

Politicians are becoming more engaged with pensions”

Sure, pensions are not a quick study. They demand a grasping of detail and some immersion in a technical vocabulary. But as pensions rise up the political agenda so to do incentives for politicians to engage and absorb.

Nor is this just a matter of the pensions flexibilities raising the industry’s profile. Auto-enrolment by creating a mass occupational system creates the conditions for an inexorable rise in the political salience of pensions.

Which takes us back to Churchill. In a political world where action always trumps inaction, and with occupational pensions once more becoming a mass savings vehicle, time to buckle in.

The ride has only just begun.