DWP backs expansion of pensions auto-enrolment for millions of young and low-earners | Personal Finance | Finance


The Department for Work and Pensions (DWP) has confirmed it will back a private members bill, which will see the Government’s automatic enrolment regime expanded to reach millions more. The private members bill from MP Jonathan Gullis grants two extensions to automatic enrolment, which include abolishing the lower earnings limit for contributions and reducing the age for being automatically enrolled in workplace pensions from 22 to 18 years old.

Commenting on the bill, Laura Trott, minister for pensions, 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.”

Lowering the age at which eligible workers must be automatically enrolled into a pension scheme by their employers from 22 to 18 aims to help make saving more commonplace for young adults and enable them to begin to save from the start of their working lives.

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In addition, the bill provides for the removal of the Lower Earnings Limit, supporting those with low earnings and multiple jobs by ensuring they are saving from the first pound earned.

According to the DWP, the provisions in the bill will not result in any immediate change but will give the Secretary of State powers to amend the age limit and lower the qualifying earnings limit for Automatic Enrolment.

Gary Smith, director of financial planning at wealth management firm Evelyn Partners, said: “If these proposed reforms to auto-enrolment are enacted, it would dramatically boost the numbers of younger workers saving into a workplace pension and the amounts being saved by lower earners – by ensuring they are saving from the first pound earned.

“Given the powerful effects of compounded returns, early pension saving is hugely beneficial and can prevent savers later in life having to make up for lost time by funnelling a large percentage of their monthly pay into their pension.”

This is a particularly progressive step as, Mr Smith explained, that data released by Retirement Living Standards measures indicates lower earners “fare poorly” and can face a “straitened retirement” relying almost completely on the state pension.

Mr Smith continued: “This situation could deteriorate as the cost of living has ratcheted up, and while inflation might come down, it’s not going away.

“The DWP backing for this bill may go some way to remedying the low savings rate among lower earners and that’s to be welcomed.”

However, he added: “The self-employed are now the cohort who might get left behind in terms of private pension provision unless the authorities devise some imaginative nudges to address that as well.”

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The midlife MOT, which was expanded to help “millions” more from July 2022, is free support to encourage people in their 40s, 50s and 60s to make more active planning in the key areas of work, well-being and money.

As part of the expansion, Mid-life MOTs are now delivered online, in the private sector, and through the Department for Work and Pensions (DWP’s) national network of jobcentres.

Guy Opperman, minister for pensions and financial inclusion, said: “The challenges we’ve faced over the last few years have highlighted the importance of financial resilience. As people live longer and healthier lives, planning for work, wealth and well-being in later life is vital.

“Our Mid-life MOT expansion [gives] people the tools they need to assess where they currently are and how they can get to where they want to be – whether it’s that next career move or ensuring they’re on track for the retirement they want.”



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