Auto-enrolment  

Master trusts call for opt-down option with AE rate increase

No plan

Current auto-enrolment rules dictate that employers must enrol into a pension scheme any staff aged between 22 up to the state pension age, and who earn more than £10,000 a year. There is also a £6,240 lower earnings limit, which is the threshold that allows employees to qualify for certain state benefits, including the basic state pension.

In its 2017 auto-enrolment review, the Department for Work and Pensions proposed auto-enrolling workers from the age of 18 and abolishing the low-earnings threshold, with these changes to be implemented by mid-2020s.

But as members of the Work and Pensions committee pointed out, the government has not started work on implementing these reforms.

In a follow-up hearing with the committee, Jamie Jenkins, director of policy and external affairs at Royal London – and one of the authors of the DWP’s 2017 report – noted that the two recommendations were "key" and there was “absolute consensus” about the proposed timeline.

“What we lack at the moment a plan which we can put in front of employers and employees and say ‘this is what is happening’.

“We need to do that, because we can't do that one year before we make the change, we need two, three, four years before, so we already running slightly late on that timetable.”

Questioned by MPs on which proposals were more urgent, Jenkins pointed out the removal of the lower earnings, “particularly because there is not something employees can by their own behest overcome, it's in the rules”.

“There are people in lower earnings, particularly women, who are affected by that. Whereas 18 years old can start saving on an opt-in basis,” he added.

Smart Pensions Philp noted that the pensions industry keeps calling “for the government to bring forward proposals” on these reforms.

Philp, who worked in HM Treasury between 1997 and 2010, said: “My fear, and I speak from experience on this, is that there is a wider question which is probably getting on the way of this consultation, which is the potential costs to the Exchequer.

“Because if you expand coverage, if you get people saving more, that as obvious implications for tax relief. So, I can imagine interesting discussions are going on within government as to potential timings on some of this as well.”

Industry split on removing £10,000 earnings trigger

Currently, only individuals earning more than £10,000 can be auto-enrolled by their employers into a pension scheme, which some experts are keen to see abolished, such as Joanne Segars, chair of trustees at Now Pensions.

She told the committee that some 3mn people were locked out of auto-enrolment, with women making up the majority of this group, “mostly because they don't hit that £10,000 earnings cap”.