Belfast Telegraph

We'll grow old waiting for the government's pension reforms

By David Prosser

Having told us all to pay off our credit cards, but only once we've spent a bit more to get the economy back on track, is the Prime Minister about to make a similar pronouncement about saving for the future?

The introduction of auto-enrolment, the system where all employees will automatically be joined up to an occupational pension scheme unless they specifically opt out, is finally due to go live next year, seven years after it was first proposed.

It is a response to the fact so few Britons are making any provision for their retirement and has been welcomed by every pension expert you care to ask.

There is, however, a growing fear that the government is about to announce a postponement of auto-enrolment, on the grounds that it is not appropriate for the current economic environment.

Advocates of a delay include Adrian Beecroft, the venture capitalist charged by the government with reporting on how regulation and red tape might be eased in order to help business.

The argument is that it is the wrong time to be asking employers, particularly small and medium enterprises, to take on the costs of auto-enrolment - both of administering the scheme and of contributing on behalf of staff.

There is a second reason to consider delaying, one that has parallels with the way David Cameron was forced to backtrack on his credit card advice at the Conservative party conference.

It is that if 7m people are suddenly enrolled in a pension scheme at work, there will be a substantial hit to the economy as their contributions eat into their take-home pay. Some estimates say the hit could amount to a £10bn fall in annual consumer spending.

There is going to be a row in Westminster over this. Delaying auto-enrolment suits the Treasury, charged with delivering economic growth, and the Department for Business, worried about easing the burden on employers, but the Department for Work and Pensions (DWP) is wedded to the scheme because its focus is on the shortfall in most people's planning for old age.

On the basis of political power, one would bet on a coalition of George Osborne and Vince Cable, in charge of the first two ministries, winning the day over Iain Duncan-Smith, the Secretary of State at the DWP.

That would be unfortunate, for the reality is that every delay in pension reform will mean a more miserable old age for millions. And there will always be reasons to consider putting off today what is more easily left for tomorrow.

Remember too that auto-enrolment is being phased in over a four-year period, which means the hit to consumer spending will not be fully felt until 2016.

That's when the smallest employers - those likely to find the reform hardest - must join up. It would be fascinating to know what Lord Turner thinks about the debate.

Now best known as the chairman of the Financial Services Authority and tipped as a replacement for Sir Mervyn King at the Bank of England in 2013, his preoccupations these days are economic. But it was his Pensions Commission that proposed auto-enrolment in 2005.