Industry experts have expressed disappointment at the lack of a timetable for expanding auto-enrolment, following a debate on the topic in Westminster Hall.
The Department for Work and Pensions published a report in 2017 recommending that workers should be auto-enrolled from the age of 18 as opposed to the current age of 22, and the low-earnings threshold should be abolished.
Both suggestions enjoy cross-party support. Earlier this month, Conservative MP Richard Holden tabled a motion in the House of Commons aimed at expanding auto-enrolment in line both with the DWP’s recommendations and those made by think tank Onward, which proposed a phased approach to the changes.
Under that proposal, the earnings trigger and age limit would be abolished in 2023, but the qualifying earnings limit would be reduced gradually and not be entirely removed until 2026.
Good intentions are no longer enough, we need action
Sir Steve Webb, LCP
On Wednesday, fellow Conservative MP Gareth Davies called a debate in Westminster Hall on the same subject, pointing to the well-known achievements of auto-enrolment since 2012, with workplace pensions participation now standing at 88 per cent.
“When a policy has such an impact, is so successful, it is right that we debate and discuss how we can build on that success,” he said.
“I believe that of all the options the minister has in front of him, expanding this policy to those aged 18 to 21 years old will have the most material impact for our country.
“Automatic enrolment should be extended as a priority to young workers because, for them, that potential compound interest is greatest, the pressures of demographic change are most acute, the challenges of mental health and climate change are especially relevant, and the need for greater financial inclusion is most pressing.”
He pointed out that only 18 per cent of eligible 18 to 21-year-olds are currently enrolled in a workplace scheme, despite this being the age group that would benefit most from compound interest.
MPs from several parties spoke in support of the proposal, including shadow pensions minister Matt Rodda, who pointed to research suggesting that employees would be able to save an extra £2.6bn a year “if the earnings trigger was scrapped”.
‘Events have got in the way’
Rodda asked pensions minister Guy Opperman to give an update on “what stage the government has reached in its consideration of this process”.
In response, the minister said the government had committed to introducing the changes in phases, but would not be drawn on precisely when they would begin to take effect.
“Clearly, events have got in the way […] over the past four or five years, but the practical truth is that it is the unquestioned commitment of the government that we will bring forward new measures in respect of the lower earnings limit and [age] threshold, without a shadow of a doubt,” Opperman said.
“The way in which we do that and the phasing of that is still a matter of ongoing debate within government. People above my pay grade have to make decisions on that. It is obviously dependent on other pieces of legislation and other considerations.”
He added that any change would have to involve primary legislation introducing primary measures and enabling powers, then secondary legislation, and then a consultation with “timings to follow thereafter”.
noted the cross-party support for the bill, but said that what would go into the next Queen’s Speech — due in May — was not his decision.
Minister’s response ‘a huge disappointment’
Responding to the minister’s comments, former pensions minister and LCP partner Sir Steve Webb branded it a “huge disappointment”, since despite four years having elapsed since the DWP’s report, “we are still no nearer to seeing these modest changes implemented”.
“The government needs to realise the urgency of this issue. A whole generation of people who missed out on [defined benefit] pensions and are only building up modest [defined contribution] pensions could be set for a miserable retirement unless the pace of change is increased,” he said.
“Good intentions are no longer enough, we need action.”
Kate Smith, head of pensions at Aegon, welcomed the fact that MPs were debating the issue, which she said demonstrated “that there continues to be cross-party support for auto-enrolment, almost 10 years after it was first introduced in 2012. This is an amazing achievement in itself”.
MP seeks to extend auto-enrolment to 18-year-olds
Proposals that would see working 18-year-olds and low earners automatically save into a pension are being put before parliament this week.
“Implementing the 2017 review recommendations and extending its reach to include 18 to 21-year-olds will go some way to support the government’s levelling-up agenda. This allows this group to start saving earlier and benefit from a valuable employer pension contribution,” she continued.
“For this reason we’re supportive of this happening as soon as possible, along with a plan to base auto-enrolment contributions from the first pound of earnings.”
Smith added: “Unfortunately, we still don’t have a timetable for implementing the 2017 review of auto-enrolment, as conversations are still ongoing across government, but there’s a possibility that enabling legislation may be included in the Queen’s Speech in May. Until then we await with bated breath.”
