Updated: DWP backs Private Member’s Bill on AE reform

The Department for Work and Pensions (DWP) has backed MP Jonathan Gullis’ Private Member’s Bill on plans to expand auto-enrolment (AE).

The bill, which was published yesterday (2 March) and passed the second reading stage today (3 March), seeks two extensions to AE, abolishing the lower earnings limit for contributions and reducing the age for being automatically enrolled to 18.

The provisions in the bill are not intended to result in any immediate change, and will instead give the Secretary of State powers to amend the age limit and lower qualifying earnings limit for AE.

However, there would be a statutory requirement to consult and report on the outcomes to inform the implementation approach and timing, before using these powers.

The DWP emphasised that, following the success of AE, the government intends to continue its work with employers and pension providers to further boost the amount of people in a workplace pension and the amount they save for retirement.

“We know that these widely supported measures will make a meaningful difference to people’s pension saving over the years ahead," Pensions Minister, Laura Trott, stated.

“Doing this will see the government deliver on our commitment to help grow the economy and support the hard-working people of this country, particularly groups such as women, young people and lower earners who have historically found it harder to save for retirement.”

Gullis added: "Auto-enrolment of pensions will benefit scores of young people in all four corners of the country, which is why I am delighted that Minister for Pensions, Laura Trott, is supportive of the bill.

“With all the evidence of the huge positive impact it can have, it is a no-brainer that we now need to extend auto-enrolment to those aged 18 and above. I am confident this bill will make a huge difference to people from Kidsgrove to Consett”.

The Pensions and Lifetime Savings Association (PLSA) also backed the bill, stating that this would provide the legislative footing needed to extend AE so that a greater number of savers can have an adequate income in retirement.

The PLSA also highlighed the DWP's support as suggestion that these changes are "very likely to make it into law at some point over the next year with the result that millions of people will get a better pension when they retire".

PLSA director of policy and advocacy, Nigel Peaple, stated: “AE has seen over 10 million people newly saving or saving more for a pension in the UK.

"This is a genuine success story. Combined with the new state pension, automatic enrolment ensures that many more people can meet some of the costs of later life.

“As new DWP analysis confirms today, however, some groups are not currently within the scope of the automatic enrolment regime which limits their ability to save effectively, and the level of automatic enrolment saving is low in comparison to workplace pensions of the past.

"Unless more money is set aside for the purpose of retirement, future generations will find that their incomes will be insufficient to meet their retirement goals.

“The PLSA supports increasing the momentum in automatic enrolment by extending it to workers under age 22 and removing the lower earnings limit (LEL) so that people save from the first pound of earnings.

"We have also long maintained that in order for savers to reach an adequate income in retirement, further increases should be undertaken over the next decade so that AE rises from an 8 per cent pension contribution today to around 12 per cent in the early 2030s – split 50/50 between employers and employees.

“We are very pleased to support Jonathan Gullis MP’s private member’s bill which will provide the legislative footing to extend automatic enrolment so that a greater number of savers can have an adequate income in retirement."

Association of British Insurers (ABI) director of policy, long-term savings, health and protection, Yvonne Braun, also welcomed the news, stating: "The success of [AE] policy over the last 10 years is down to consensus between government, political parties, industry and employers, and we stand ready to work with Jonathan Gullis MP and all other partners to build on this over the next decade.”

Adding to this, LCP partner, Steve Webb, highlighted the news as a "landmark day for UK pensions", arguing that "with pensions policy having been stuck since the 2017 review there was a real risk that the gains from automatic enrolment would be stalled".

"Now that the government is backing the necessary legislation the way is cleared for younger workers to be brought in and for lower earners in particular to build up pensions more quickly," he continued.

"The new minister, Laura Trott, deserves huge credit for her role in unlocking this logjam”.

Aegon head of pensions, Kate Smith, also highlighted the government backing as "fantastic news", suggesting that the next step should be to agree a timetable for implementing these enhancements.

"With the next General Election to take place not later than January 2025, we urge the government to start phasing this in from April 2024," she stated.

This was echoed by Aviva managing director for wealth and advice, Michele Golunska, who stated that whilst a step in the right direction, rising prices could present a challenge.

“Now, in the middle of a cost-of-living crisis, is not the time for radical change but providing a clear ‘roadmap’ and timeline for these reforms will give employers and pension savers time to plan, helping to ensure better retirements," she stated.

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