It’s all too easy to put off thinking about the distant future. And for too long that’s what too many of us did when it came to pensions. This meant that there were too few people saving for retirement – about 10 million people were not saving enough for their ‘Third Age’. In an effort to nudge them into doing the right thing in 2012 the Government introduced ‘auto-enrolment pensions’ – meaning that earners had to opt out of making pension contributions rather than opt in.
Such a simple idea and yet the results have been spectacular. In Brentwood and Ongar alone, 15,000 people are now saving towards their retirement thanks to the Government’s auto enrolment scheme.
Employers must enrol staff aged 22 and over who earn more than £10,000 into a pension and figures from the Pensions Regulator show 1,780 businesses in the constituency have enrolled in the scheme since it started.
Employers have to enrol staff who are between 22 and the State Pension age, working in the UK, and earning more than £10,000 per year. The roll out began in 2012, but the duties will extend to the smallest and newest firms by this year. At the moment the scheme doesn’t extend to those who are self-employed, but the Department for Work and Pensions has set its sights on making auto-enrolment work for them next.
Whilst it’s meant some extra work for businesses, especially the smaller ones, the results will be hugely positive for everyone involved. Literally tens of millions of people will be better off in retirement as a result.
As Work and Pensions Secretary Esther McVey has said: “Saving at a young age for pensions is vital and that is why I believe the automatic enrolment will change the way future generations think. It will become the norm for people to put away money for later in life and the Government is committed to helping save for the future.”
In some ways this is a new form of government, known as ‘nudge theory’, one that gently encourages people to do the right thing rather than forcing them to. There many other areas in which it can be used, one of the most interesting is that of organ donation. Since 2015 in Wales people have had to opt out of being an organ donor rather than opt in – and there has been a significant increase in the number of organs available to save lives. We’ve been consulting on introducing the same system in England – do let me know what you think. www.alexburghart.org.uk