Employees who opted out of their workplace pension due to COVID-19 should be encouraged back into saving sooner than auto-enrolment rules would usually allow, a Government committee has said.
Under current auto-enrolment rules, employees aged between 22 and state pension age who earn more than £10,000 a year are automatically enrolled into a workplace pension scheme.
They can choose to opt-out of the scheme at any time, but employers must re-enrol them after three years.
The Work and Pensions committee, however, is urging the Pensions Regulator (TPR) to consider relaxing the rules to help employers re-enrol such workers much sooner.
The committee believes many savers may have left their auto-enrolment pension as a result of suffering coronavirus-related financial difficulties.
In the report, MPs said:
“Employees cannot legally be encouraged by their employer to opt-out of their [workplace] pension contributions, but many people may opt-out voluntarily if their incomes fall because of the pandemic.
“We recommend that the Pensions Regulator consider whether employees who do opt-out during the pandemic should be helped to re-enrol earlier than would happen normally under auto-enrolment.”
The report recognised that the continuing need to pay pension contributions may be an additional burden for businesses that are already under financial pressure.
David Fairs, executive director of regulatory policy at TPR, said there was a need to “strike a balance” between acknowledging the difficulty for employers, and supporting savers at a time when their pension contributions are particularly valuable.
Pension contributions made when market values are low can see sharp increases in value if and when the market bounces back to usual levels.
Recent data from the Department for Work and Pensions showed that the total amount saved into workplace pensions rose by £5.3 billion in 2019, but this is likely to slump in 2020.
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