21/12/2017
Recommendations arising from the automatic enrolment review (UK)
Young people from 18 years old to benefit from saving an additional £800 million through a workplace pension is one of the headline recommendations to emerge from the year long review of automatic enrolment undertaken by the government to identify how to build on its success.
Since its launch in 2012, the Dept for Works & Pensions claims automatic enrolment has been a ‘game changer’. More than 9 million people are now enrolled into a workplace pension, including a large number of new savers under the age of 30.
However, the review also estimates there are still around 12 million individuals under-saving for their retirement, representing 38% of the working age population.
While the overall priority is for individuals to keep saving and to save more after minimum contributions reach 8% in 2019, the government recognises that contributions of 8% are unlikely to give all individuals the retirement to which they aspire.
It also recognises that younger people, part-time workers and, in particular the self employed can achieve more security in later life.
‘Automatic enrolment review 2017: Maintaining the momentum’ lists the following recommendations, which government estimates will deliver an additional £3.8 billion of pension contributions, taking the total to £24 billion
- automatic enrolment duties continuing to apply to all employers, regardless of sector and size
- workplace pension contributions calculated from the first pound earned, rather than from a lower earnings limit. This will bring an extra £2.6 billion into pension saving, improving incentives for people in multiple jobs to opt-in and simplifying the way employers assess their workforces and calculate contributions
- the earnings trigger will remain at £10,000 for 2018/19, subject to annual reviews
- contribution levels will be reviewed after the implementation of the 8% contribution rate in 2019
- ‘targeted interventions’ to be tested by working with organisations such as banks and labour contractors – who act as ‘touch points’ for the 4.8 million self-employed people – to explore how technology can be used to increase their pension saving
Government commitments include
- normalising pension saving among workers
- helping lower earners save for retirement
- supporting part-time workers, who are predominantly women
- simplifying automatic enrolment for employers
Government will be working with employers and the pensions industry towards introducing these reforms in the mid-2020s, thus ensuring businesses and savers have time to plan for the changes.
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