Automatic enrollment and escalation might not be the right solutions for the defined contribution arrangements of flexible workers, delegates heard during a briefing with plan sponsors and managers in London by NEST Insight, the research unit of the £2.7 billion ($3.6 billion) National Employment Savings Trust, London.
As retirement needs are changing, meeting those needs in the context of saving plans requires rethinking of policy and plan design for the flexible economy workers and the self-employed, speakers agreed.
Charlotte Clark, director of private pensions and stewardship at the U.K. Department for Work and Pensions, speaking on the panel said, "Auto escalation is a fantastic idea but there is no way to legislate for it in the whole of the retirement system." The 8% total contribution, which the U.K. system will get to in April 2019, "is about right, but there is no one right contribution for all of the workers, including millennials, Generation X and those that will not benefit from the safety of the defined benefit pension," she said.
William Sandbrook, executive director at NEST Insight, said during a separate panel: "Auto enrollment may not be the right solution for a defined contribution savings system" in the flexible economy. "We need to think which components of auto enrollment can be replicated into (an arrangement) for the self-employed" and which should be reconsidered. Mr. Sandbrook added that a digital payroll system, which application-driven employees are using, such as Uber drivers, might be a more appropriate route to deducting retirement contributions.
"We have to rethink the retirement product design for the self-employed as they may be psychologically different and have different attitudes toward the risk," Mr. Sandbrook said, adding a hybrid model or a liquid account, like the sidecar account that NEST is testing, could be a better alternative. "Workers could be accumulating savings through an account that only locks the retirement savings away once a set limit is achieved."