HC1494 Work & Pensions CommitteeLetter from Steve Webb MP, Minister of State for Pensions to the Committee Chair

I am grateful for the opportunity to provide evidence to the Work and Pensions Select Committee’s inquiry into automatic enrolment and NEST yesterday. It was an interesting and well-informed discussion, and I very much appreciate the Committee’s positive and constructive approach to these important reforms. I look forward to your conclusions in due course.

I am writing to ensure my answer to one of your questions is not mis-construed. In answer to your question (Q366) about the amount of pensions contributions lost as a result of the lengthening of the implementation period for the reforms, I indicated that I expected this to be significantly less than the £5 billion estimated by Adrian Boulding in his earlier evidence to you. My answer was based on the view that the contributions “lost” is equal to the reduction in employer contributions over the relevant period (as an individual’s contributions would not be “lost”, but would be retained by them and could, if they wished, be saved via alternative means).

Having had the opportunity to revisit what Adrian said, however, I suspect his calculation may have been based on the sum of contributions made by both the employer and the individual. If this is the case, it would, of course, lead to a larger sum, perhaps in excess of his £5 billion estimate.

As I mentioned yesterday, the Department is currently working on a detailed impact assessment for the revised implementation approach, which we will publish shortly. This will provide us with robust estimates of the impact of our changed approach and I will write to you again once this analysis is available.

27 January 2012