Pension saving set to be extended to ‘millions’ more Britons

The Department for Work and Pensions (DWP) today confirmed a proposal to expand pension saving to larger numbers of Britons. The Government has backed a bill which proposes to expand Automatic Enrolment, commonly known as auto-enrolment to more people.

At present, all employers must provide a workplace pension scheme, but will only need to enrol their members if they meet all of the following criteria:

• A person is classed as a ‘worker’
• A person is aged between 22 and state pension age
• A person earns at least £10,000 per year
• A person usually (‘ordinarily’) works in the UK.

However, a Private Members Bill, backed by the Government, has called for two extensions to auto-enrolment.

It would abolish the Lower Earnings Limit for contributions and reduce the age for being automatically enrolled to 18.

As a result, millions more people would become eligible for a workplace pension to help them save towards retirement.

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The Bill will be consulted on, and the outcome reported before these powers are used.

Kate Smith, head of pensions at Aegon, welcomed the news, stating: “It’s fantastic news that the Government has confirmed its support for enhancements to auto-enrolment, originally put forward back in 2017. The next step is to agree a timetable for implementing these enhancements.

“With the next General Election to take place no later than January 2025, we urge the Government to start phasing this in from April 2024.

“Basing contributions from the first pound of earnings rather than on a band above £6240 will mean contributions from both individuals and employers increase. Employees pay five percent so this equates to £312 a year, but after tax relief, this is just over £20 a month. But with employer contributions, this will be boosted to £499 a year extra.

“To avoid an overnight change, it will be important to introduce this gradually over a number of years, particularly as we emerge from the current cost of living crisis. Otherwise, someone earning £12,480 would see their contributions double overnight.”