Expansion of auto-enrolment pension to under-22s given Royal Assent

The Department for Work and Pensions (DWP) has seen the successful passing of a Bill, presented by MP Jonathan Gullis, that aims to broaden the scope of auto-enrolment pensions.

The legislation includes provisions for extending auto-enrolment pensions to individuals below 22 years of age and to those categorised as low earners. This represents a significant departure from current regulations, which stipulate 22 as the minimum age for auto-enrolment.

Although there is no fixed timeline for the introduction of these changes, the Bill required to grant the Government powers to enact these changes has been given Royal Assent.

The Bill provides two notable changes to Government policy in relation to auto-enrolment, allowing them to:

  • Reduce the minimum age for contributions to 18 years old.
  • Decrease the minimum earning threshold for employer contributions from £6,240 to just £1, meaning that virtually any employee can request to be included in the scheme.

Under the current regulations, employers are obligated to contribute to the pensions of employees whose annual earnings range from £6,240 to £50,270. However, individuals retain the option to opt out of the pension scheme.

The expansion of auto-enrolment pensions was a topic identified for attention during a government review in 2017. However, the proposed changes were shelved until now. Since the inception of auto-enrolment in 2012, pension savings in the UK have seen an increase of £32.9 billion, leading to a total of £114.6 billion saved.

Alongside these proposed changes, the DWP intends to continue its improvement efforts by introducing tools such as pension dashboards.

However, the launch of this project has been delayed due to technical complications and is not expected to be available until 2025. The department is also introducing mid-life MOTs, intended to provide advice on retirement saving and to encourage individuals over the age of 50 to rejoin the workforce.

Despite these advancements, attaining a financially secure retirement remains a challenging endeavour for many in the UK. DWP research indicates that approximately 38per cent of the working-aged population, equating to 12.5 million individuals, are not saving sufficiently for their retirement.

Even those categorised as higher earners are found to under-save, indicating that the issue of inadequate retirement savings is pervasive.

Future changes to the minimum pension age are set to further complicate the landscape of retirement.

The age at which individuals can claim their private pensions is set to increase from 55 to 57 years in 2028, with the likelihood of further increases in subsequent years. This adjustment aims to align the minimum pension age with the state pension age, typically set 10 years ahead.

The proposed changes underscore a focus on promoting retirement savings, irrespective of age or income level.

Although the date at which these changes will be enacted is, as yet, unclear the powers available to Government may mean that we may soon see their introduction.

With more individuals starting to save from a young age and continuing throughout their working lives, the prospect of a secure retirement becomes more attainable.

Posted in News, Newswire.