The government has
announced proposals to extend pensions auto enrolment to include younger
workers and to amend the way in which contributions are calculated.
According to the press
release:
‘The review’s recommendations, which will now be progressed and
legislated for where necessary, will see:
• automatic enrolment duties
continuing to apply to all employers, regardless of sector and size;
• young people, from 18 years
old, benefiting from automatic enrolment, introducing 900,000 young people into
saving an additional £800 million through a workplace pension;
• workplace pension
contributions calculated from the first pound earned, rather than from a lower
earnings limit – this will bring an extra £2.6 billion into pension saving,
improving incentives for people in multiple jobs to opt-in, and simplifying the
way employers assess their workforces and calculate contributions;
• the earnings trigger
remaining at £10,000 for 2018/19, subject to annual reviews;
• contribution levels
reviewed after the implementation of the 8% contribution rate in 2019;
• the government testing a
series of ‘targeted interventions’ – including through opportunities to work
with organisations who act as ‘touch points’ for the 4.8 million self-employed
people, such as banks and those who contract labour – to explore how technology
can be used to increase their pension saving.’
Under auto enrolment,
employers are required to automatically enrol all eligible workers (generally
employees) into a workplace pension scheme and pay a minimum contribution into
their pension. Employees do, however, have the right to opt out of auto
enrolment.
Currently workers who are
aged between 22 and the State Pension Age with earnings of £10,000 per annum
are eligible to be auto enrolled. Younger employees and those who do not meet
the minimum income requirement can opt to make pension contributions.
The government plan to
reduce the lower age limit to 18 by the mid 2020s, in order to encourage
younger workers to get into ‘the habit of
saving’.
David Gaulke, Work and
Pensions Secretary said:
‘We are committed to enabling more people to save while they
are working, so that they can enjoy greater financial security when they
retire. We know the world of work is changing, so it is only right that pension
saving does too. This ambitious package will see more people than ever before
helped onto the path towards building a secure retirement.’
Mike Cherry, National
Chairman of the Federation of Small Businesses (FSB), stated:
‘Requiring employers to contribute from the first pound of
earnings will mean that, by 2019, hundreds of thousands of small employers will
have to pay up to £180 more per employee each year. ‘For employers in certain
sectors, such as care and hospitality where margins are tight, this will really
add up.’
If you would like help or advice
on complying with your Auto Enrolment duties please contact the team at Ward
Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.