The long-awaited Private Members’ Bill (the Bill) to expand the auto-enrolment (AE) regime to enhance its reach and reduce earnings limits has passed its third reading and now moves on to the House of Lords. The Bill seeks to abolish the lower earnings limit for contributions and to reduce the age for being automatically enrolled to 18. The Department for Work and Pensions backed the Bill last month. Read more about this and AE more generally on our previous blog.
The Pensions Minister, Laura Trott, commented on the third reading, declaring the government’s support for the Bill and that “a lot has been achieved in the past decade in these reforms. Over 10 million people have been enrolled into a pension [and] more than 2 million employers are paying into employees’ pensions for the first time“.
Why the AE changes are being considered
The 2021 census showed that there remain pension participation issues amongst employees aged under 22 years old and those who work part-time hours. The census highlighted that across 2021:
- the employee pension participation rate was lowest for those aged 16 to 21 years at 20%; and
- only 43% of the lowest earning full-time employees (earning £100 to £199 per week) were participating in a pension. This was around half the rate of equivalent earners in the public sector.
By contrast to the participation of those groups of workers, the 2021 census also highlighted that pension participation in the private sector for eligible employees had increased from 41% in 2012 to 85% in 2021. The Bill seeks to encourage those who are aged under 22 or who work part-time to begin to provide for their retirement in a more timely fashion. The effect of the AE regime up to this point suggests that the measures included in the Bill will have at least a reasonable success rate.
Food for thought
If the House of Lords agrees to the Bill, it will pass back to the House of Commons for final agreement before receiving Royal Assent and becoming law. From July to December 2022, the Pensions Regulator issued 28,027 Compliance Notices and conducted 87 investigations in relation to non-compliance with AE obligations. Employers may therefore wish to keep a close eye on the Bill’s developments as the reach of AE is set to expand, increasing employers’ responsibilities in the AE space.
To get in touch with one of our pensions experts for advice on auto-enrolment issues or for any other pension queries, please contact Eleanor Hart (firstname.lastname@example.org) or your usual pensions contact.