The Department for Work and Pensions (DWP) has announced its backing for proposals which could lower the age at which people are automatically enrolled into a workplace pension to 18. Currently, employers must automatically enrol workers into a pension scheme and make contributions if they are aged between 22 and the State Pension age and earn at least £10,000 a year.
The Lower Earnings Limit, at £6,240, is the minimum level of an enrolled worker’s earnings on which they and their employer have to pay contributions. Conservative MP Jonathan Gullis’s Private Members’ Bill, backed by the UK Government, grants two extensions to automatic enrolment - abolishing the lLower Earnings Limit for contributions and reducing the age for being automatically enrolled to 18.
Removing the earnings limit could help to bring more lower earners and people working part-time jobs into automatic enrolment. The Bill cleared its first hurdle after MPs gave it an unopposed second reading, it will now undergo further scrutiny at a later date and is on track to become law.
The intention is that the provisions will not result in any immediate change but will give the Secretary of State powers to amend the age limit and lower the qualifying earnings limit for automatic enrolment.
There will be a statutory requirement to consult and report on the outcomes to inform the implementation approach and timing, before using these powers.
DWP Minister for Pensions Laura Trott said: “We know that these widely supported measures will make a meaningful difference to people’s pension saving over the years ahead.
“Doing this will see the Government deliver on our commitment to help grow the economy and support the hard-working people of this country, particularly groups such as women, young people and lower earners who have historically found it harder to save for retirement.”
Stoke-on-Trent North MP Jonathan Gullis, said: “Auto-enrolment of pensions will benefit scores of young people in all four corners of the country, which is why I am delighted that Minister for Pensions Laura Trott is supportive of the bill.
“With all the evidence of the huge positive impact it can have, it is a no-brainer that we now need to extend auto-enrolment to those aged 18 and above. I am confident this Bill will make a huge difference to people from Kidsgrove to Consett.”
Automatic enrolment has seen over 10 million people newly saving or saving more for a pension in the UK.
Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association (PLSA) called the announcement a “genuine success story”.
He added: “Combined with the new State Pension, automatic enrolment ensures that many more people can meet some of the costs of later life.
“The PLSA supports increasing the momentum in automatic enrolment by extending it to workers under age 22 and removing the Lower Earnings Limit so that people save from the first pound of earnings.
“We have also long maintained that in order for savers to reach an adequate income in retirement, further increases should be undertaken over the next decade so that automatic enrolment rises from an eight per cent pension contribution today to around 12 per cent in the early 2030s - split 50/50 between employers and employees.”
Following the success of the Automatic Enrolment, the Uk Government intends to continue its work with thousands of employers and pension providers to further boost the amount of people in a workplace pension and the amount they save for retirement.
It will also continue its work on empowering savers to know their pension options by introducing revolutionary products such as Pensions Dashboards and Mid-life MOTs, providing accessibility and innovation in how people save for their retirement.
However, earlier this week, it emerged that the timetable for the Pensions Dashboards Programme, which will eventually enable people to see all their pension pots - including State Pension - in one place online, is being pushed back.
Pension schemes were due to start connecting to dashboards from August 31, 2023 and dashboards were expected to be available to the public next year, but Ms Trott said previously that more time is needed to deliver the “complex build” - find out more about the delay here.
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