The hugely successful pension auto-enrolment scheme is being widened to include all workers from the age of 18 (currently from age 22) and the minimum earning threshold of £6,240 per annum is to be abolished so that the first pound of earnings will be used for pension contributions.
The Department for Work and Pensions announced the changes this month which will unlock the initiative to millions more workers, allowing them to benefit from employer contributions and tax relief on pension contributions. Although no formal date has been set for the revised rules, they are expected to come into force from April 2024 and industry experts are praising the proposals.
Partner and Pension Actuary at Quantum Advisory, Stuart Price, said:
“Auto-enrolment is one of the most effective formats implemented within the pension industry. Since its inception in 2012, employee participation in a workplace pension has increased in every industry with pension contributions rising from £41.4billion in 2012 to £62.3billion in 2021. Younger workers will likely see the most benefits; profiting from compound interest growth while also forming a solid foundation of saving for retirement as soon as they start their working lives.
“Despite its success and these latest changes, more still needs to be done, including allowing the self-employed to access the scheme and raising contributions paid in by both employees and employers. The latter might not be a vote-pleaser, but the current combined contribution of 8% of salary is too low and will not provide recipients with enough money to pay for a comfortable retirement.
“That being said, this latest Bill is certainly a big step in the right direction and helping to prioritise pensions for all.”
For more information about Quantum’s Auto Enrolment service, click here.