The Department for Work and Pensions (DWP) has issued a statement on a major change to pension policy that has been in law since 2023 but has yet to be implemented. The expansion of auto-enrolment would lower the minimum age from 22 to 18 and remove the lower earnings threshold of £6,240, meaning contributions would start from the first pound of income.
Current auto-enrolment rules
Under current rules, employees aged 22 and over earning at least £10,000 a year are automatically enrolled into a workplace pension. The minimum total contribution is 8 per cent of earnings, with at least 3 per cent from the employer and the rest typically from the employee. Contributions are only paid on income above £6,240.
Legislation passed in September 2023 provided for the expansion, but it has not yet been brought into force. The DWP was asked for an update on the matter.
DWP statement and Pensions Commission
A DWP spokesperson said: "The Government recognises that millions are not saving enough for their retirement. That is why last year we revived the Pensions Commission to review our pensions system as a whole."
The commission, made up of independent experts, is examining how to ensure secure retirements for tomorrow's pensioners and will publish a final report and recommendations in early 2027. It is looking at various aspects of pensions, including how the state pension factors into this.
Expert says expansion could make a real difference
Mark Pemberthy, benefits consulting leader at consultancy firm Gallagher, said that expanding auto-enrolment could have a significant impact. He said: "If there's one reform that could make a real difference for younger workers, it's expanding auto-enrolment."
He added: "The legislation is already in place to lower the minimum enrolment age from 22 to 18, and to remove the lower earnings threshold that does not attract pension contributions, but there's still no timetable for implementation of these changes."
He also said: "Committing to a timetable [to expand auto enrolment] now will particularly benefit younger workers, part-time employees, and lower earners, giving their pension savings even longer to benefit from compound growth."
