A former Conservative minister has said that lowering the age threshold for automatic pension enrolment could make young workers £30,000 better off in retirement. Tory MP Jonathan Gullis said his plans to reduce the age of Auto-Enrolment to 18 would be “transformative” for future pensioners.
Employers must currently automatically enrol workers into a pension scheme and make contributions if they are aged between 22 and State Pension age and earn at least £10,000 a year. Reforms backed by Mr Gullis aim to extend Automatic Enrolment to workers under the age of 22 and reduce or repeal the lower earnings limit to qualify.
The UK Government’s intention is to reduce the lower age limit to 18, according to the Pensions (Extension of Automatic) Enrolment (No. 2) Bill. Urging the Commons to back the Bill, Mr Gullis said: “Extending eligibility age to 18 will support younger workers and provide them with the opportunity to begin saving from the start of their working lives for a more secure retirement.”
He added: “Removing the lower earnings limit will proportionally benefit the lowest earners the most.
“It simplifies the process and for just a few pounds a week, through the power of compound interest, people could be £30,000 better off in retirement.
“This would be absolutely transformative, which is why this Bill is so critical.”
The Bill recently cleared the Commons unopposed and will now be considered by the House of Lords before it can become law. MPs across the political spectrum gave their backing to the plans.
Conservative MP for Darlington Peter Gibson recalled feeling “fearful” as an employer when automatic enrolment was first introduced, but said extending the scheme was a “commitment to level up for the long term”.
He added: “I saw first hand the benefits this scheme has had on the lives and future of my employees, employees who would never have considered being part of a pension scheme were put into a position where it became a simple and easy process for the first time.”
Shadow work and pensions minister Alison McGovern gave Labour’s backing to the Bill, but asked when the Government planned to roll out the reforms if they become law.
Department for Work and Pensions (DWP) Minister Laura Trott responded: “Once we are through the consultation stage we have a timeline for when we are going to be able to progress forward.
“I think that is something that we need to work up a plan around and I will be coming back to the House on.
“In terms of a timetable for when it will come into force, the commitment has previously been the mid-2020s. That is what we will continue to say. We will have more of an idea once we have done the consultation process though.”
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