The Work and Pensions Committee is to review auto-enrolment minimum contribution rates as part of an inquiry into reforming the system to benefit low earners in particular.
The committee, chaired by Labour MP Debbie Abrahams, announced the inquiry this week. It will explore potential reforms to the auto-enrolment system “to help ensure fair employer and employee contributions to secure a decent retirement income for low earners”, according to a press release.
The inquiry will run concurrently with the work of the Pensions Commission and aims to feed into its final report, expected in the spring of 2027.
Abrahams said: “Last year we looked at the devastating effect of poverty on pensioners – it isolates, damages health and strips people of dignity. The Pension Commission’s finding that we’re on course for tomorrow’s pensioners to be poorer than today’s was shocking.
“This needs to be addressed, and in doing so, policymakers should be mindful of the burden any fix would place on low earners and employers. The committee will seek to inform the Pensions Commission’s work by looking at whether minimum auto-enrolment contributions should increase, and if so, when, by how much, and how the cost of any increase is shared.”
The Work and Pensions Committee is inviting evidence submissions by 26 October.
It is focusing on how much contributions should increase by, and how these increases should be balanced across workers and employers. It is also exploring the timeframe for increasing contributions, as well as other policy design issues that can support long-term savings.
The committee will also look at the practicalities of removing the lower earnings limit and earnings trigger for auto-enrolment. The legislation for this is already on the government’s statute books but has yet to be enacted.
What the research says about raising contributions
In recent years, several organisations have conducted research into the effects of raising minimum contribution rates, with widely differing outcomes.
Research published in 2024 by Standard Life (then known as Phoenix Group) claimed that increasing minimum auto-enrolment contributions from 8% to 12% could bring an additional £10bn a year into the pension system and significantly boost the retirement savings of younger members.
The Institute for Fiscal Studies has published multiple recommendations for updates to the auto-enrolment regime, emphasising the need for a more nuanced approach to protect the finances of low earners.
Other studies have shown employers to be in favour of raising contributions, but have also warned of potential negative impacts on companies if this burden is raised too much.
