Bill to extend AE scheduled for third reading; consultation expected in 'autumn'

A Private Member’s Bill looking to extend auto-enrolment (AE) to lower earners and younger workers has been scheduled for a third reading on 24 March, with a consultation on the implementation approach and timetable to be launched in "autumn".

MP Jonathan Gullis’ Private Member’s Bill seeks two extensions to AE, abolishing the lower earnings limit for contributions and reducing the age for being automatically enrolled to 18.

The bill, which is backed by the Department for Work and Pensions (DWP), passed the committee stage on 15 March, and has now been scheduled for a third reading on 24 March, after which it will go to the House of Lords for its first reading.

During the committee stage debate, Pensions Minister, Laura Trott, also confirmed that there will be a consultation on the implementation approach and the timetable, with hopes that this will be launched by autumn.

Commenting in the House of Commons, Trott stated: "On timing, I would like to launch the consultation in the autumn, with this bill going through, I hope, in the near future.

"I cannot say anything further than “mid-2020s”, I am afraid, but as soon as I am in a position to provide an update, I will of course do so.

"Our objective is to maintain the broad political consensus for workplace pensions, which has been an important part of the success of the reforms since the beginning.

"The approach taken in the bill to guarantee meaningful and detailed consultation to help implement the changes will help to build enduring support for this important work to boost the retirement aspirations of millions of our fellow citizens."

Whilst the Private Member's Bill looks to extend AE to those over the age of 18, rather than the current 22, MP for Glasgow East, David Linden, also called for this to be changed to age 16.

"We all agree that AE has been a success and extending it further to younger cohorts is clearly a good thing," he stated.

"On that, we will not disagree, but I do not understand why the proposal is to stop at age 18, not extending it all the way to 16, bringing it in line with the point when income tax kicks in, and including all workers."

Commenting in response, Trott suggested that the government "could also look at what we can do for 16-year-olds", stating: "Even if we do not get quite where the hon. Member for Glasgow East wants us to with the age, I think there is more we can do to encourage them to opt in. We can discuss that as part of the consultation."

Ahead of the committee stage, the DWP also published an impact assessment for the bill, revealing that although the legislation will not result in any immediate costs/benefits, if the powers were used to implement the proposals set out in the 2017 review, total pension contributions could increase by £45bn over 30 years, and around £2bn in year one.

Of this, employer contributions are expected to total £19bn, £0.8bn in year one, while employee contributions are expected to total £21bn, £0.9bn in year one, and income tax relief on employee contributions will reach £5bn.

Commenting on Twitter, WTW senior consultant, David Robbins, pointed out that the DWP has roughly halved its 2017 estimate of how much pension contributions would rise if they were always payable from the first £1 earned and if enrolment was from 18.

In addition to this, he argued that £2bn is a “small fraction” of the £115bn that DWP says was contributed to workplace pensions in 2021, suggesting that the “lower the number, the more likely HMT is to give the green light".

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