Briefing paper on AE progress published

A briefing paper has been published in the House of Commons library on the current state of auto-enrolment (AE) policy and its plans for reforms in 2020.

It looked at the issues facing AE, including self-employed workers, age thresholds, qualifying earnings and at which earnings juncture contributions should be paid.

The paper - Pensions: automatic enrolment - current issues - highlighted that the “variability and uncertainty of income could create barriers to retirement saving for self-employed people”.

It stated that further analysis was expected later in 2020, with these findings informing the next stage.

Following the analysis, the government confirmed it has plans for technology-based trials testing tools and solutions to “make it easier for self-employed people to save for the long term”.

The Commons’ paper also confirmed that the government still planned to implement changes to the age at which employees are auto-enrolled, from 22 to 18, in "the mid-2020s, subject to consultation and the introduction of legislation”.

“Normalising pension saving from the earliest opportunity will promote good savings habits for young people and ensure that 18 to 21 year olds who were not previously eligible to be automatically enrolled are treated in the same way as those aged 22 and above,” the paper stated.

It conceded, however, that the government still needed a better understanding about the post-state pension age cohort of workers, as AE thresholds have an upper age limit in line with the state pension age.

Commenting, The People's Pension director of policy, Gregg McClymont, said: “The long-term nature of pensions means that the earlier someone is enrolled the more they, their employer and the government will put into their pension pot, giving it more time to grow.

“If we wait until the middle of this decade to extend auto-enrolment to 18 year olds, then eight years will have passed by since this crucial change was first pledged. We would like to see this change implemented earlier to help younger savers start saving as early as possible for their futures.

“Now, more than ever, we should be encouraging everybody to start saving as much as they can for their future – once the Covid-19 crisis recedes.”

The paper also noted that the government had planned to change the framework so that pension contributions would be paid from the first pound earned.

The government noted: “We recognise that employers and other delivery partners need time to plan for these changes so that they can manage costs with certainty and will ensure that before any changes are made to automatic enrolment, we have full discussions with stakeholders, followed by formal consultation in due course.”

Furthermore, the paper signalled that the government remained committed to removing the lower earnings limit in the mid-2020s, although this was subject to discussions with stakeholders, finding ways to make the changes affordable and learning from the statutory contribution increases.

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