More people should be automatically enrolled in workplace pensions, scrapping the age and earnings thresholds that have existed since auto-enrolment began to be phased in a decade ago.
That’s according to Richard Holden MP who is today tabling a private members’ bill to increase pension participation among lower paid, younger and part-time employees.
It comes as the centre-right think tank Onward published a report, Levelling up pensions, analysing how pension reforms would boost opportunities for poorer workers and regions.
The government indicated last year that it is “committed to implementing the ambitions” of a 2017 review of auto-enrolment by the Department for Work and Pensions. That includes “lowering the age for being automatically enrolled from 22 to 18 and abolishing the automatic enrolment lower earnings limit, so that contributions are payable from the first pound of earnings”.
However it said this would happen in the “mid-2020s”, suggesting it may not happen in the current parliament.
Holden, Conservative MP for North West Durham, told the PA news agency: “The majority of my constituents start work at 18. And I think it’s only fair that everybody, when they start work, should be getting this contribution.
“It shouldn’t just be something for graduates, or when everybody else happens to graduate, because the compound interest for decades will mean so much more.”
Since auto-enrolment was introduced in 2012, the proportion of employees in workplace pension schemes has risen from 47% to nearly 78% in 2020.
But auto-enrolment does not apply until people are earning more than £10,000 per year and are over the age of 22 years old. This results in a workplace pension participation rate of just 20% for 16-21 year-olds, 41% for those earning £100-£199 per week, and 58% for part-time employees, according the Onward analysis.
Employees aged 16-21 years old are currently five times less likely to have a workplace pension as middle-aged employees.
Holden said it is “iniquitous” that somebody working two part-time jobs, each paying below the earnings threshold is denied the pension that somebody working full-time would get.
“It’s clearly going to be a substantial change so it needs to be announced in advance.”
The report by Onward found that abolishing the £10,000 earnings trigger for auto-enrolment and the £6,240 lower earnings limit for pension contributions, as well as reducing the age threshold would lead to a full-time worker on the national living wage would gain an extra £93,989 over a working lifetime, which would be a 60% increase in their workplace pension savings.
Younger workers would save an extra £20,267 upon retirement, while a worker with two part-time jobs, each paying £190 a week, could see their pension savings triple to £297,600.
Following the 2017 review, the government carried out a consultation on simpler annual benefit statements for workplace pensions. A requirement for more straightforward statements will be introduced for defined contribution pension schemes used for auto-enrolment from 1 October 2022.