Auto enrolment Review in 2017 pledged key reforms in the ‘mid 2020s’ which included lowering the age threshold for auto enrolment to 18 and removing lower earnings limit so that workers save into a pension on the first £1 of earnings.
At a time when people are coming under severe financial pressure, these reforms have the power to boost their savings plans for later life and set them on course for a financially stable retirement.
Lowering the minimum age at which someone first qualifies for auto-enrolment from 22 to 18 will capture millions of savers from an earlier age.
AJ Bell head of public policy, Rachel Vahey, says: “Likewise, removing the lower earnings band could significantly boost how much people save for retirement – particularly those who don’t earn much, including part timers and women. Someone earning £15,000 could see their contributions soar from £700 to £1,200 a year – an increase of over 70%.
“Saving into a pension can be a tough ask financially. But the pain can be eased by starting early and saving as much as you can. These reforms promise to tackle these two points head on.
“Equally, the government are clearly aware that the measures will increase the cost of employer pension contributions paid by UK companies big and small. There is also a danger that some workers are put off by the idea of funnelling a larger part of their payslip into a pension, and decide to opt out of saving for retirement altogether. Those concerns mean the government is, rightly, keen to consult widely on the proposals in detail before bringing them into force.
“However, no consultation has yet appeared. Given the time involved in delivering that consultation and then implementing the changes with sufficient notice for employers, implementation of the new rules is likely to fall to the next government and the mid 2020s target will be tested.
“The government now needs to make good on its promises. Over six years after agreeing to these changes and five months after the Act has been passed, it now urgently needs to take the next step to helping people save in a pension and consult with the industry and others.”