Legislation has been approved to expand the current pension auto enrolment rules, but policy experts are calling for further changes that could see savers pay an extra four per cent into their pensions.
The team at the Standard Life Centre for the Future of Retirement is urging the Government to expand auto enrolment rules further, with a combined contribution rate of 12 per cent. This would mean an extra four per cent being paid in.
Current auto enrolment rules
Under the existing system, workers aged between 22 and state pension age earning £10,000 a year or more are automatically enrolled into a workplace pension scheme. The state pension age is moving up in stages from 66 to 67 between April 2026 and April 2028.
Contributions are only paid on earnings above £6,240 a year. The minimum contribution is the equivalent of eight per cent of salary, typically made up of a five per cent employee contribution and a three per cent employer match.
Legal changes already approved
Legislation approved in 2023 will extend auto enrolment to reduce the minimum age to 18 and scrap the £6,240 earnings limit, so contributions are paid on the first £1 of income for those earning above £10,000. However, these changes have yet to be implemented.
Centre director Catherine Foot said: "Automatic enrolment has transformed pension saving, helping millions more people build up money for retirement. But too many people are still missing out, while others aren't saving enough to enjoy the retirement they hope for."
Ms Foot added: "Extending automatic enrolment from the age of 18 and ensuring pension contributions are calculated from the first £1 of earnings could make a real difference, particularly for those on lower incomes or starting out in their careers. The earlier people start saving, the more time they have to build their pension."
Call for higher contribution rates
Ms Foot also called for changes to increase the amount people pay in. She said: "It's not just about getting people into the system. We also need to help them understand the value of saving and that remaining at minimum contribution levels may not deliver the retirement they expect. Over time, there is a strong case for moving towards a combined contribution rate of 12 per cent, while ensuring contributions remain affordable and encouraging greater engagement with pensions."
The ongoing pensions commission is also considering the adequacy and sustainability of UK pension savings. An interim report said auto enrolment had increased workplace pension saving but "not enough" for low and middle income earners, adding that the eight per cent minimum "has become more of a norm than a minimum".
The pensions commission is expected to present its final report and recommendations to the Government in February 2027.
