In Parliament today, Richard Holden, MP for North West Durham, will seek to introduce a Private Members Bill calling for working 18-year-olds to be automatically enrolled, and for the £10,000 earnings trigger to be scrapped, so that low-income workers can benefit from automatic enrolment into their company pension.
Recommendations published today in a report by think tank Onward and the Levelling up taskforce1 called for the automatic-enrolment age threshold to be reduced to 18 years old and the lower qualifying earnings threshold to be removed. The UK government has previously acknowledged auto-enrolment issues and committed to making changes by the “mid-2020s.”
PMI director of policy and external affairs Tim Middleton says: “The changes that Richard Holden MP is seeking to introduce were to form part of the reforms to automatic enrolment due to be implemented this decade, but he is to be congratulated for recognising the urgency needed to drive current pensions policy and for seizing the initiative now. It is hugely encouraging that one of Parliament’s younger members should be prepared to take such a bold approach to pensions saving when most politicians are preoccupied with other matters.”
NOW: Pensions head of campaigns Samantha Gould says: “We very much welcome the recommendations put forward in today’s 10-minute rule bill. This year marks a decade since auto-enrolment was introduced in the UK and it undoubtedly has been a major success in allowing millions of people to save into a pension for the first time. However, while more people have the opportunity to save, the number of underpensioned people has grown to 2.8 million people. Underpensioned groups such as single mums, carers or people with disabilities don’t choose to be underpensioned, but the current rules mean they’re not eligible to be auto-enrolled.
“We have long campaigned for the changes outlined in today’s Bill and it will help tackle the growing gap between those who can save into a pension and those who can’t.”
Aviva is urging the government to put a plan in place right away for how and when it will eliminate the lower qualifying earnings threshold and lower the minimum age threshold for automatic enrolment to 18 years old.
Aviva director of workplace savings Emma Douglas says: “The current auto-enrolment system disproportionately disadvantages younger workers, part-time workers, and those with multiple lower-paid or part-time jobs.
“These proposed changes to auto-enrolment could make a real difference to the future retirement plans of today’s lower-paid and part-time workers as everyone who is in a pension scheme will get a contribution from the first pound they earn. However, the target date of “mid-2020’s” can only be achieved if a roadmap is agreed now. Employers and employees need time to plan. The clock is ticking and the longer it does, the less there will be in the pension pots for those who might need it most.”
Canada Life technical director Andrew Tully says: “Auto enrolment has been a huge success with many people now saving for their retirements. And yet many more people could be saving earlier by extending the reach of the scheme to those over 18 and lower earners. This would significantly level the playing field and would change the financial lives of many people.
“As we debate auto-enrolment it would be equitable to discuss the challenge of the self-employed. Clearly, the issues here are more complex in the context of auto-enrolment. IFS research shows there has been a decline in the proportion of the self-employed expecting to receive any income from a private pension, so this is a significant challenge and one where despite there being no simple answer, we may have to think outside the box. Giving self-employed greater incentives to save in a pension, or allowing them to access their funds in certain circumstances to help their business, may be worth considering.”
Scottish Widows head of policy Pete Glancy also welcomes the next evolution of the AE scheme, particularly to assist low earners and multi-jobbers, as research shows that nearly one million people are missing out on £76 million in employer contributions to their pension.
Scottish Widows retirement expert Pete Glancy says: “Richard Holden MP’s proposed legislation is a step in the right direction and will give working 18-year-olds four extra years of saving as well as the compound investment growth that comes with that, which could make the average pension income around 15 per cent higher than under the present arrangements. Under a review of Auto Enrolment conducted by the Department for Work and Pensions in 2017, it was recommended that the age at which people are auto-enrolled be reduced from 22 to 18. To date that recommended change has not been progressed by Government and this bill is a welcome nudge towards now making that happen.
“These proposals also help low earners and multi-jobbers, who we’ve long pointed out are penalised by the unfair system. Our research shows nearly one million low earners with multiple jobs are missing out on £76m a year in employer contributions to their pension. That’s because workers who earn less than £10,000 a year in a single job are not eligible for auto-enrolment, even if their combined earnings takes them well above the qualifying threshold. Worryingly more than half of multi-jobbers (55 per cent) have taken on an additional job since the start of the pandemic making this a growing problem and increasing the urgency to address the issue.
“Scottish Widows believes that any further review of AE should consider enabling workers on very low earnings to opt-out of employee contributions if they are struggling to make ends meet, but still benefit from a contribution from their employer towards their retirement. At present employers are able to suspend the contribution which they make towards an employee’s pension when the employee is unable to afford to also contribute themselves. Any new legislation should incorporate that flexibility for very low earners.”