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A bill currently progressing through Parliament could reduce the age and wage at which employers and employees start paying into pensions.  

Given the seismic upheavals in virtually every other area of life over the past few years, the world of pensions auto-enrolment has been happily controversy free for the past few years. Aside from tweaking the contribution rates, not much has changed, but now a new Private Member’s Bill currently making its way through Parliament may herald the biggest shake up to the system since its launch. 

What are the pension auto-enrolment changes?

Introduced by Jonathan Gullis MP and now having received government backing, there are two proposed changes: 

Lowering the age for auto-enrolment: Currently, employees aged 22 or over (and below State Pension age) should be auto-enrolled in a workplace pension. The proposal to lower the age threshold to 18 would enable workers to save far more in their pension pots before they reach pension age. 

Lowering the trigger point: Currently, employee earnings must be £10,000 or more to trigger auto-enrolment. Under the bill, this threshold will be removed, enabling workers to start saving into pensions from the first pound they earn post-18. 

What has the government said about pensions?

Supporting the bill, Minister for Pensions, Laura Trott, said: 

“We know that these widely supported measures will make a meaningful difference to people’s pension saving over the years ahead. 

“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.” 

What has the industry said about pensions?

There’s been a general thumbs up for the move. Financial Reporter quotes Michele Golunska, managing director for wealth and advice at Aviva, who captured the general mood of the industry when she said: “This is great result for young pension savers, who will benefit from getting on the pension ladder earlier and those all-important employer contributions. It is also good news for the lowest earners and those working multiple jobs who would benefit from getting pension contributions from the first pound they earn. 

“This is a step in the right direction, and we look forward to working with government to bring in these reforms.” 

Some, however, feel the changes are underpowered, with other industry figures commenting that, while auto-enrolment currently kicks in at 22, 18-year-olds are currently  free to choose to opt in and few do. With the cost-of-living putting huge strain on finances, David Robinson, co-founder at Wildcat Law, believes the practical effect is that we should: “Expect to see the number of individuals opting out skyrocket.” 

Will the bill become law?

It’s looking likely, At time of writing, the bill has already passed through the Commons and is at second reading stage in the Lords. There’s a reasonable chance payroll departments could be implementing revised procedures by the start of the next financial year, although full implementation could be staged over a number of years to reduce the financial shock to individuals and companies.  

Find out more about how to make managing your auto-enrolment easier.