‘Landmark day’ as DWP backs measures to expand automatic enrolment

Today has been hailed as a ‘landmark’ for pensions policy as the Government has finally agreed to back legislation designed to expand the automatic enrolment policy.

The expansion of automatic enrolment was proposed back in 2017 by a Government review but no action had been taken since then to implement those proposals. Today, the Government has given its backing to a Private Member’s Bill which will make the necessary changes.

The key changes are:

- To require automatic enrolment of employees as soon as they reach 18 rather than the current age of 22;

- To apply the mandatory 8% contribution to earnings ‘from the first pound’ rather than only to those above a lower earnings limit;

The Bill will have to complete its remaining stages in the House of Commons and will also need to be approved by the House of Lords, and it is not yet clear exactly when the changes will come into force.

The change to the threshold for the 8% contribution rule is likely to need to be phased in over a couple of years, as some lower earners could see their contributions more than doubled.

Steve Webb, former pensions minister and partner at consultants LCP, said: “This is truly a landmark day for UK pensions. With pensions policy having been stuck since the 2017 review there was a real risk that the gains from automatic enrolment would be stalled. Now that the Government is backing the necessary legislation the way is cleared for younger workers to be brought in and for lower earners in particular to build up pensions more quickly. The new Minister, Laura Trott, deserves huge credit for her role in unlocking this logjam.”