Onward and pension firms write to govt urging extension of AE

Think tank Onward and nine pension firms have written to Chancellor, Rishi Sunak, calling for the extension of automatic enrolment (AE) to include younger people, part-time workers and people on lower incomes.

The letter urges the government to reduce the AE age threshold from 22 to 18 and to gradually abolish the £6,240 lower earnings limit.

It follows the news that MP Richard Holden’s Private Member’s Bill on extending AE did not receive its scheduled second reading, with Pensions Minister, Guy Opperman, stating that there was “no real way” it would be ready in time for the Queen’s Speech.

Onward’s report on ‘levelling up pensions’, published in January, helped inform the bill, although its recommendation to remove the earnings trigger over a four-year period was not included.

The letter, signed by Onward, the Association of British Insurers, Aviva, Hargreaves Lansdown, Legal & General Investment Management, Just Group, Now Pensions, Standard Life, Scottish Widows and The Investing and Saving Alliance, warned that too many people miss out on the benefits of AE and called on the government to meet the mid-2020s reform deadline outlined in the 2017 AE Review.

Furthermore, the letter stated that extending AE would generate billions of pounds in capital for pension schemes to deploy towards infrastructure, housing and other investments.

“AE has been a huge success since it was introduced a decade ago but too many younger and low-paid workers still miss out,” stated Onward director, Will Tanner.

“It is only right that the government corrects this oversight and extends them the benefits of AE.

“Extending AE to younger and low-paid workers would not just help individuals and their families save for the future, it would generate billions of pounds that could be invested in the government’s mission to level up the UK.”

Also commenting on the letter, Aviva director of workplace savings and retirement, Emma Douglas, said: “Recent events, including inflation hitting record highs and the increased cost of living, means that it will be a financially challenging year for many, and long-term savings might not feel like a priority.

“So, we are calling on government to put a ‘roadmap’ in place now for how and when it will implement the removal of the lower qualifying earnings limit and reduce the minimum age threshold to 18 years old for AE.

“There is never a ‘perfect time’ to increase pension contributions, but a phased approach should help to ease any sudden financial impact on employers and employees.”

Standard Life managing director of pensions and savings, Colin Williams, added: “In just short of a decade, AE has helped increase the number of people saving for retirement and embed a saving culture within UK workplaces.

“While much progress has been made since 2012, some of the measures introduced at launch simply don’t go far enough today to facilitate saving at the level needed to sustain a good retirement, while any delay to proposed reforms could have a detrimental impact on the retirement prospects of Britons in years to come.

“We fully support both reducing the age at which people benefit from AE to 18 years old and the removal of the lower earnings limit, which is why we’ve signed this open letter to the Chancellor as many people are still missing out on the positives of AE.

“However, we would go further and urge the government to remove the earnings trigger which is currently set at £10,000 as that would bring more people, especially women and part-time workers, into workplace pensions.

“We believe these proposals would allow more workers to benefit from AE for the entirety of their adult working lives, which would improve the retirement prospects of millions of people and further advance a workplace savings culture in the UK.”

The letter has also been copied to Work and Pensions Secretary, Thérèse Coffey, Leader of the House of Commons, Mark Spencer, Pensions Minister, Guy Opperman, and Downing Street Policy Unit director, Andrew Griffith.

    Share Story:

Recent Stories

Are current roads into retirement delivering member value?
Laura Blows explores HSBC Master Trust’s recent report, Converting pension pots into incomes, with HSBC Retirement Services CEO, Alison Hatcher.

Savings and finance at retirement
Laura Blows is joined by Claire Felgate, Head of Global Consultant Relations, UK, at BlackRock, to discuss savings and finance at retirement. Please click here for an edited write-up of the video

Making pension engagement enjoyable through technology
Laura Blows speaks to Nick Hall, business development director and Chartered Financial Planner at UK-based Wealth Wizards about the opportunities that technology provides for increasing people’s engagement with pensions and increasing their retirement wealth. Please click here for an edited write-up of the video

Pension portfolios – the role of asset-backed securities
Laura Blows is joined by Royal London Asset Management (RLAM) head of sterling credit research, Martin Foden, and its Senior Fund Manager, Shalin Shah to discuss the role of asset-backed securities (ABS) within pension fund portfolios
Incorporating ESG into fixed income
Laura Blows is joined by TCW head of fixed income ESG, Jamie Franco, to discuss incorporating environmental, social and governance (ESG) strategies into fixed income portfolios