A Private Members’ Bill that seeks to enact changes to pensions auto-enrolment (AE) legislation was introduced to parliament last week. The Bill, introduced by Richard Holden MP, aims to remove the £10,000 lower earnings threshold and extend the eligible age of auto-enrolment (AE) from 22 to 18 by 2026. The Government had made a previous commitment in 2017 to extend the AE age to those aged 18 and over, and had pledged to scrap the use of earnings thresholds by the mid-2020s.

The Bill follows a report published by think-tank Onward, which suggests the measures will boost pension savings by almost £2.8trn. The report says:

“Doing so would help individuals and their families to save for the future, and generate trillions in capital for pension funds to deploy towards infrastructure, housing and other investments central to the Government’s economic ambitions. The potential gains are considerable."

The report estimates that abolishing the £10,000 earnings trigger for auto-enrolment and the £6,240 lower earnings limit for pension contributions, alongside reducing the age threshold from 22 to 18 years old, would lead to the following benefits:

• A full-time worker on the National Living Wage would gain an extra £93,989 over a working lifetime, which would be a 60% increase in their workplace pension savings.
• Younger workers would save an extra £20,267 upon retirement, on average, from being enrolled at age 18 rather than age 22.
• A worker with two part-time jobs, each paying £190 a week, could see their pension savings triple to £297,600.
• Over the whole working lifetime of the current workforce, the total additional savings could be as high as £2.77 trillion, creating significant additional resources that could be deployed in the Government’s levelling up agenda.

Addressing parliament last week, Richard Holden MP said:

“I am grateful to Onward for its help in the past few months, working with me on the report it has published today on some of the specifics that the Bill will provide. Our country needs to feel long-term levelling up in action, and one of the best ways we can do that is to give people certainty that this is coming down the track and that their pensions will be there for them, providing for them. This legislation would transform the lives of millions of working people – not in great jobs but in low-paid work – who are the backbone of our country.

“Auto-enrolment has been one of the massive hidden triumphs of the last decade in the UK but sadly millions of hard-working British people aren’t benefitting because they’re under 22 or simply not working enough hours. Nothing could show clearer intent towards long-term levelling up than ensuring that everyone who works hard will see a safer and more secure retirement.”

Holden also acknowledged that organisations will need to be kept informed of proposed changes, stating that “business needs to be able to plan for it”.

Aviva Director of Workplace Savings, Emma Douglas agreed, commenting:

“The target date of mid-2020s can only be achieved if a roadmap is agreed now. Employers and employees need time to plan. The clock is ticking and the longer it does, the less there will be in the pension pots for those who might need it most.”

The Bill is scheduled for a second reading on 25 February.