PensionsMar 3 2023

DWP backs 'landmark' expansion of auto-enrolment

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DWP backs 'landmark' expansion of auto-enrolment
Minister for pensions, Laura Trott, said the reform will make a meaningful difference to people’s pension saving over the years ahead
ByRuby Hinchliffe

The Department for Work and Pensions has confirmed it will back a private members bill which would see the government's automatic enrolment regime expanded to reach millions more people.

A private members bill from MP Jonathan Gullis, backed today (March 3) by the government, grants two extensions to automatic enrolment – abolishing the lower earnings limit for contributions and reducing the age for being automatically enrolled from 22 to 18 years old.

Former pensions minister Steve Webb said the backing from government signalled a "landmark day" in the world of pensions.

"Today, the government has given its backing to a private member’s bill which will make the necessary changes," Webb explained.

"The key changes are: to require automatic enrolment of employees as soon as they reach 18 rather than the current age of 22, and to apply the mandatory 8 per cent contribution to earnings ‘from the first pound’ rather than only to those above a lower earnings limit."

The expansion of automatic enrolment was proposed back in 2017 by a government review, but no action had been taken since then to implement those proposals.

Minister for pensions, Laura Trott, said the reform will make a meaningful difference to people’s pension saving over the years ahead.

"Doing this will see the government deliver on our commitment to help grow the economy and support the hard-working people of this country, particularly groups such as women, young people and lower earners who have historically found it harder to save for retirement," said Trott.

Earlier today, data from the DWP showed 12.5mn people are still undersaving for retirement, prompting firms to call for further pension reform.

The man behind the bill, Gullis, added that it was a no-brainer to extend auto-enrolment to those aged 18 and above.

"Lowering the age at which eligible workers must be automatically enrolled into a pension scheme by their employers from 22 to 18 will make saving the norm for young adults and enable them to begin to save from the start of their working lives," said the DWP.

"In addition, the bill provides for the removal of the lower earnings limit, supporting those with low earnings and multiple jobs by ensuring they are saving from the first pound earned."

The government also said it intends to continue its work with thousands of employers and pension providers to further boost the amount of people in a workplace pension and the amount they save for retirement.

"It [government] will also continue its work on empowering savers to know their pension options by introducing revolutionary products such as pensions dashboards and mid-life MOTs, providing accessibility and innovation in how people save for their retirement," it said.