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Automatic Enrolment

Volume 633: debated on Monday 18 December 2017

The Government have published their “Automatic Enrolment Review 2017: Maintaining the Momentum” as a Command Paper (CM 9546). A copy of the accompanying analytical report, which underpins this review, has been placed in the House Library.

Since 2012, over 9 million people have been automatically enrolled into a workplace pension and over 900,000 employers have met their duties. The workplace pension participation rate for eligible men and women in the private sector is now equal. By 2019/20 we estimate an extra £20 billion a year will go into in workplace pension savings as a result of automatic enrolment. This is helping people achieve greater financial security in later life, and encouraging a culture of saving.

The review sets out our ambition to build on the success of automatic enrolment to date, with a comprehensive and balanced package of proposals to continue to normalise pension saving, namely:

confirming that automatic enrolment should continue to be available to all eligible workers regardless of who their employer is;

making saving the norm for young people, by lowering the age for automatic enrolment from 22 to 18, to bring an extra 900,000 people into workplace pensions;

supporting all those who are automatically enrolled, particularly those with low earnings and multiple jobs, to save more for retirement by removing the lower earnings limit so that their contributions are calculated from the first pound of earnings.

Recognising the diversity of the 4.8 million classified as self-employed, for whom a single saving intervention might not be effective, we will work to implement our manifesto commitment by testing targeted interventions aimed at the self-employed, which are set out in the review report, to identify the most effective options to increase pension saving among self-employed people.

We will also work to ensure that the rules around automatic enrolment for those working in atypical ways or in non-standard forms of employment are clear, and that enforcement of the automatic enrolment duties for employers remains robust. The Government’s forthcoming response to Matthew Taylor’s review of modern working practices, which is due to be published shortly, is relevant to this work. My Department will continue to work closely with the Department for Business, Energy and Industrial Strategy, HMT and HMRC to ensure suitable alignment and clarity is achieved across our policies.

The review also calls upon the pensions industry, employers, and the wider advisory and intermediary community to work with Government on better, simpler, engagement. Our aim is to help savers understand the benefits of workplace pension saving, so that they are better able to plan for security in retirement.

It is the Government’s ambition to implement changes to the automatic enrolment framework in the mid-2020s, subject to discussions with stakeholders around their detailed design in 2018/19, finding ways to make the changes affordable, and followed by formal consultation with a view to introducing legislation in due course. The discussions with stakeholders will allow us to build consensus on the shape and design of the package, helping develop our detailed plans and implementation timetable, which can then form part of the formal consultation.

The Government are grateful to the review’s external advisory group, chaired by and made up of experts from within the pensions industry, and those representing member interests and employers. This group has provided invaluable insights and constructive challenge in shaping the review.

The 2017 review also outlines findings from the statutory review of the alternative quality requirements for defined benefit schemes (under section 23A of the Pensions Act 2008), and the alternative quality requirements (under section 28 of the Pensions Act 2008).

Annual thresholds review

Running concurrently with this review of automatic enrolment, the statutory annual review of the automatic enrolment earnings thresholds has been completed for the 2018/19 tax year.

The Government will lay an Order before Parliament in the new year which will include the following thresholds for 2018/19: £6,032 for the lower earnings limit of the qualifying earnings band and £46,350 for the upper limit of the qualifying earnings band.

The automatic enrolment earnings trigger will remain frozen at £10,000.

This will ensure that a period of stability and consistency is maintained ahead of the increases in contributions from April 2018, while also ensuring that those, for whom it makes economic sense to save, continue to be brought into workplace pensions and have the opportunity to build up meaningful savings.

A copy of the automatic enrolment earnings trigger and qualifying earnings band for 2018/19: supporting analysis has been placed in the House Library. These papers will be available today on website.

“Automatic Enrolment Review 2017: Maintaining the Momentum” sets out a clear direction of travel to build on the successes of the policy to date, and move forward the Government’s ambition for a more robust and inclusive savings culture; specifically supporting younger generations, lower earners, and women with the opportunity to build up pension assets for a more secure retirement.