More than a decade on from auto-enrolment, the majority are under-saving for retirement

For those that are not in scope for auto-enrolment, they do not even get to benefit from what are essentially 'free' employer contributions.

People who currently do not benefit from auto-enrolment include those under 22 years and those earning less than £10,000 a year. Students with part-time jobs and those with multiple jobs are affected by these requirements.

We should be encouraging young people to start saving for retirement as soon as they can.

For those people entering the workforce at 18 years old on a salary of more than £10,000 a year, they will have to wait four years before receiving any pension contributions from their employer. 

Employers can choose to enrol these employees and make contributions in respect of them, but there is no obligation to do so. 

Reforms needed

There have been calls to extend the scope of auto-enrolment. The Automatic Enrolment Review 2017 recommended that auto-enrolment be extended to include those aged 18-22, and that the lower qualifying earnings threshold be removed.

The Conservative MP Richard Holden introduced a private member’s bill laying the groundwork to introduce reforms echoing the 2017 review.

A second reading of the bill is scheduled for November, subject to sufficient parliamentary time being allocated. Time will tell if the bill progresses. It has already been halted once.

For those who argue that now is not the time, auto-enrolment is about choice, not coercing employees to save for retirement.

Employers cannot know the circumstances of each employee, but if auto-enrolment was extended, everyone could choose whether to opt out of auto-enrolment – therefore opting out of the free employer contributions.

At the moment, the choice is made for 18-year-olds and those who do not earn more than £10,000 a year.

Something about the lack of choice does not seem fair, does it?

Rhiannon Barnsley is an associate at Arc Pensions Law.