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Should pension auto-enrolment be extended?

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Written by: Emma Lunn
05/01/2022
A private member’s bill proposing to extend pension auto-enrolment to workers younger than 22, will be put forward in Parliament today.

The bill also calls for auto-enrolment to be extended to workers earning less than the current £10,000 minimum threshold.

Under the current rules, in order to be eligible for auto-enrolment, workers aged between 22 and state pension age need to earn at least £10,000 per year from a single job. 

The proposals in the bill due to be presented today will draw upon the findings from a report published today by think tank Onward, which suggest the two measures could add £2.77tn to the UK’s retirement savings.

The report, titled Levelling Up Pensions, suggests a phased approach to implement the findings of the government’s 2017 auto-enrolment review over four years. 

In this review the government said it would look to change the age limit for auto-enrolment from 22 to 18 and remove the lower earnings limits the amount you need to earn to qualify for auto-enrolment by the mid-2020s.

These changes would have a big impact on the amount women and part-time workers are able to save.

Becky O’Connor, head of pensions and savings at Interactive Investor, said: “Far too many people remain outside of the current workplace pension auto-enrolment guidelines and will face a hard retirement as a result. Many of these are low earners and women – people who auto-enrolment should be helping.”

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “This report gives 2.77 trillion reasons why we need to see further reform to auto-enrolment. Auto-enrolment has boosted retirement prospects for millions of people but we can’t ignore the fact that women, young people and part-time workers are still missing out. 

“Changes to age and earnings limits mean workplace pensions can be accessed by millions more people who could see their pensions increased by thousands of pounds. The idea of contributing to a pension as soon as you start work will also become normalised.”

Up until now the government has only said it will look to make changes by the mid-2020s, but Morrissey says we need a more concrete roadplan and this report gives a clear path for how the government can do this. 

She said: “There is a tricky balancing act to be struck between bringing in much needed change while giving businesses time to prepare and the phased four-year approach outlined here does exactly this.

“Making these changes can have potentially life-changing impacts for workers up and down the country who will see their retirement savings boosted by many thousands of pounds.”

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