The pensions industry and think tank Onward have written to the Chancellor, urging him to make auto-enrolment more accessible to younger people, part-time workers and those on lower incomes.
In the letter, Onward and nine pension firms warn that too many individuals are missing out on the benefits of auto-enrolment and urge the government to ‘level up pensions for everyone’ by expanding the scheme’s reach by the mid-2020s.
The letter proposes two reforms which are a reduction in the age threshold for auto-enrolment from 22 years old to 18 years old and abolishing the lower earnings limit of £6,240 so that every worker automatically saves for a pension from their first pound in earnings.
The signatories say that these reforms should be phased in overtime to minimise company impact and avoid compounding rising worker living costs.
The signatories include Onward, Standard Life, Aviva, Legal & General, Scottish Widows, Now: Pensions, Tisa and Just Group.
Standard Life managing director of pension and savings Colin Williams says: “In just short of a decade, Auto Enrolment has helped increase the number of people saving for retirement and embed a saving culture within UK workplaces. While much progress has been made since 2012, some of the measures introduced at launch simply don’t go far enough today to facilitate saving at the level needed to sustain a good retirement, while any delay to proposed reforms could have a detrimental impact on the retirement prospects of Britons in years to come.
“We fully support both reducing the age at which people benefit from Auto Enrolment to 18 years old and the removal of the lower earnings limit, which is why we’ve signed this open letter to the Chancellor as many people are still missing out on the positives of Auto Enrolment.
“However, we would go further and urge the Government to remove the earnings trigger which is currently set at £10,000 as that would bring more people, especially women and part-time workers, into workplace pensions. We believe these proposals would allow more workers to benefit from Auto Enrolment for the entirety of their adult working lives, which would improve the retirement prospects of millions of people and further advance a workplace savings culture in the UK.”
Aviva director of workplace savings & retirement Emma Douglas says: “We welcome the recent freeze in the lower qualifying earnings limit (LET) as we support a phased approach to its eventual removal. Recent events, including inflation hitting record highs and the increased cost of living, means that it will be a financially challenging year for many, and long-term savings might not feel like a priority. So, we are calling on the government to put a ‘roadmap’ in place now for how and when it will implement the removal of the LET and reduce the minimum age threshold to 18 years old for automatic enrolment. There is never a ‘perfect time’ to increase pension contributions, but a phased approach should help to ease any sudden financial impact on employers and employees.”