The auto-enrolment review: key developments

This article is part of
Guide to the auto-enrolment review

"While lower earners will be asked to put proportionately more of their earnings into a pension, they will also benefit from a proportionately greater employer contribution.

"For someone earning £12,088, this will mean almost doubling their total pension contribution, or an immediate 3 per cent pay rise."

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The earnings trigger for auto-enrolment, set at £10,000 will remain in place for 2018/2019 although it will be subject to an annual review.

2) Lowering the age threshold

The review has outlined lowering the age criteria from 22 to 18, so pension saving is the "norm" when most individuals start work.

According to the review, this will bring a further 900,000 young people into automatic enrolment.

Mr Vidler says: "We are pleased to see the government taking on board our proposal to reduce the age threshold from 22 years to 18 years old, as the earlier people start saving, the better their retirement will be."

He explains the changes to the age threshold and the removal of the lower earnings limit will see someone who started saving at 18 years old build a pot of 15 per cent more than someone who started saving at 22 years old.

According to the review, 1.6m people are under-saving in total, and they earn less than £25,000. A significant proportion of these will be the youngest workers, and 0.9m of these are women - all sections of society the government has pledged in its review to be helping with its changes to the age threshold and the change relating to the lower earnings limit.

3) Improving participation and pension outcomes for the self-employed

According to the review a proportion of the 4.8m (and rising) self-employed is "at risk of under-saving for their retirement". Therefore the review has pledged to work to implement the government's manifesto commitment by testing targeted interventions - including making tax digital - to identify the most effective options to increase pension saving among self-employed people. 

Figures from the Office for National Statistics show that between 2001 and 2015, the number of self-employed Britons contributing to a pension scheme fell from 1.1m to 380,000.

"It is vitally important we tackle this challenge before it becomes even more serious," says Mr Vidler. 

Research carried out by the Pensions Policy Institute (PPI) on behalf of Old Mutual Wealth last year found the self-employed do have equivalent levels of wealth to the employed, but with only 12 per cent of the self-employed saving into a pension, there is a risk of poverty in retirement.

According to the study, those who do save into a pension are 10 years behind their employed peers, as the below graph from the PPI shows.