Automatic enrolment to begin at 18

Automatic enrolment to begin at 18

The age at which UK workers are registered in workplace pensions through automatic enrolment will fall to 18 years under new plans unveiled by the government.

The current age for automatic enrolment onto a workplace pension scheme is 22, but the government wants to lower the threshold to 18 to get more people into the habit of saving.

Currently, employers must enrol staff aged 22 and over and earning above £10,000 into a pension. The government’s plans to lower the threshold wouldn’t take effect until the next decade, and would likely affect some 900,000 people, according to the Department of Work and Pensions (DWP) review.

Established in 2012, automatic enrolment has been heralded as a success, with more than nine million people signed up to workplace pensions in the UK.

Commenting on the DWP’s review, Hugh Nolan, president of the Society of Pension Professionals, said: “The automatic enrolment review makes further strides towards including more new savers in pension schemes, with younger workers to be eligible, contributions payable on all earnings (up to a cap), and a focus on the tricky self-employed sector.”

““Hopefully the simplified structure will help engagement and boost saving amounts. However, there is a real danger of higher opt-outs in the key demographic of low earners who are being asked to contribute disproportionately more given their understandable reliance on the state pension.”

Workers will be still be able to opt out of a workplace pension under the changes, eliciting fears that some of the 900,000 identified beneficiaries might not take advantage of automatic enrolment and so the benefits to employers—the DWP predicts an increase in total annual pension savings of £770 million by 2020/21—might not be felt as a result.

Andrew Drake, director at JLT Employee Benefits, said: “The desire to simplify the mechanics of automatic enrolment for employers is likely to be negated somewhat by the inclusion of under 22 year olds. Younger workers are typically more prone to fluctuating earnings, lower wages and higher levels of debt than more established workers.”

“This group has yet to settle in employment and they are likely to accumulate a number of very small pension pots during this period. It also puts more pressure on assessment systems as well as smaller businesses that tend to operate more manual systems and process for automatic enrolment.”

Categories: News, UK Pensions

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