Automatic pension enrolment delayed

PLANS to automatically enrol employees into a workplace pension scheme from 2012 could be delayed after the government announced a review of the proposals.

Work and Pensions Secretary Iain Duncan Smith yesterday launched an independent review that could lead to significant changes to the auto-enrolment plans and the abolition of the government's proposed pension scheme for low earners.

Under the National Employment Savings Trust (Nest), to be phased in from 2012, workers aged over 22 and earning more than 5,035 a year will be automatically enrolled into their employer's existing pension or into the Nest scheme, with the right to opt out.

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Employers have already been given starting dates between 2012 and 2016, while minimum contribution levels have been set and charges set out. However, the government's three-month review will look at how different employers and employees will be covered by auto-enrolment.

It will also look at the earnings threshold above which auto-enrolment begins and the age group that should be covered by auto-enrolment.

Kate Smith, pensions development manager at Edinburgh-based insurer Aegon, welcomed the review: "Removing the most vulnerable groups from automatic enrolment would be a key step in the right direction. That's not to say these people can't join if they want, rather the default should be set so they would have to choose to opt in."

But Joanne Segars, chief executive of the National Association of Pension Funds, said that while it was right to ensure that auto-enrolment succeeds, the review would challenge long-established elements of the 2012 plans.

"The review must not forget that the reforms are designed to help ten million people who are not prepared for retirement, or who have missed out on pensions saving," said Segars.

The review, led by Paul Johnson of the Institute for Fiscal Studies, Adrian Boulding of Legal & General and David Yeandle of manufacturer's organisation EEF, will present its findings before the end of September.