In December 2017, the DWP published their latest review document “Automatic Enrolment Review 2017: Maintaining the Momentum”. This considers the success of Auto-Enrolment (AE) to date, and what changes may be required to build on that success in future years.
Government’s objectives are that it wants to continue to normalise pension saving among workers; help lower earners build resilience for retirement; support individuals (predominantly women) in multiple part-time jobs; and simplify automatic enrolment for employers.
Below is a summary of the recommendations made in the report which have these objectives at the fore:
- Automatic enrolment duties will continue to apply to all employers
- The intention is to lower the age criteria from 22 to 18 allowing younger people to benefit from automatic enrolment. This would bring 900,000 young people into automatic enrolment, whilst simplifying the workforce assessment for employers
- AE contributions to be calculated from the first pound earned, rather than from a lower earnings limit (£5,876 in 2017/18) and ‘entitled workers’ category to be removed. This would bring an extra £2.6 billion into pension saving and encourage individuals in multiple jobs to opt-in to pension saving. This would also help to simplify the way workforce assessment and contribution calculations.
- The earnings trigger for automatic enrolment to remain at £10,000 in 2018/19 but will be subject to annual review
- The Government will implement its manifesto commitment to target interventions, including Making Tax Digital, to identify the most effective options to increase pension saving among the self-employed. Currently a proportion of the 4.8 million self-employed people are at risk of under-saving for their retirement.
- The impact of increasing contributions will continue to be monitored and evaluated to achieve the right balance between statutory contribution rates and voluntary additional retirement savings. Recognising such changes present significant additional costs for employers and the Exchequer and significant changes for individuals, there will be consultations to explore cost mitigation and funding options.
- Effective engagement can reinforce an individual’s saving behaviour, supporting normalisation, especially where a choice exists to opt out, stop saving or save more. The report sets out specific areas where there is scope for pension providers, advisors, employers and government to build on existing and develop new initiatives that will support individuals’ engagement with and ownership of their savings to ultimately deliver better value to them
Overall Government believes Automatic enrolment has been a success with the savings behaviour of millions having changed and workplace pension saving has become normal. They feel the review’s recommendations will build on this success and create a fairer, more robust and sustainable system for the future which balances the needs of individuals, employers and taxpayers.
Wingate’s Comment: The review’s proposals are likely to be progressed once the impact of the AE minimum contribution increases (effective from April 2018 and April 2019) is known so these can be taken as ‘work in progress’ and subject to change. Nonetheless, they give a good indication of Government’s intention and it’s clear there is plenty more change on the horizon for employers, employees, and even the self-employed in relation to Auto Enrolment. We will continue to issue updates as matters evolve and you can of course contact our advisers on 01883 223360 or at email@example.com for updates or assistance.