...but what's next?

The number of individuals saving into a workplace pension increased to 79% participation in the year to April 2021, according to the latest ‘Employee workplace pensions in the UK: 2021 provisional and 2020 final results’ publication by the Office for National Statistics (ONS). This is a modest 1% increase from participation in the year to April 2020 (78%).


The gap between people with pensions in the public sector (91%) compared with the private sector (75%) is ‘amongst its lowest levels’. This, says the ONS, is because of the success of Auto-Enrolment from 2012, at which time only 47% had a workplace pension.


Of course, as we approach the 10-year anniversary of Auto-Enrolment, other figures are worth noting, reflecting the Auto-Enrolment regime:


· There are approximately 8 out of 10 workers eligible for Auto-Enrolment (based on age and earnings) that have not opted out or ceased membership. So, this is 8 out of 10 people in the age bracket 22 to State Pension age (SPa)

· Yet, this participation figure drops to 2 out of 10 workers in the age bracket 16 – 21 or over SPA. These are Non-Eligible Jobholders, i.e. eligible to go into a pension scheme if they opt-in


Therefore, the increased participation is very much dependent on the age of the worker and shows that auto-enrolling a worker is resulting in more people saving for their retirement via a workplace pension. Perhaps, people not falling into the auto-enrolment age bracket are unaware of their options to be able to opt into a workplace pension.


So, given that the UK Government wants to increase workplace pension participation, it is a small wonder that workers and employers need to keep an eye on plans to implement proposals contained in the 2017 ‘Automatic enrolment review 2017: Maintaining the momentum’. The very purpose of this review is to encourage more people to be saving more on a workplace pension and proposed two initiatives:


1. Lowering the automatic enrolment age threshold from 22 to 18, and

2. Removing the Lower Qualifying Earnings Band (QEB), previously aligned to the Lower Earnings Limit and, in many pension schemes, the earnings threshold at which the worker and employer start to pay contributions


In 2017, the UK Government’s ‘ambition’ was for these changes to take effect from ‘the mid-2020s’, a date that is not too far away and, perhaps, the reason that the Lower QEB was not increased in the 2022/23 tax year.


Although, the cost-of-living situation in 2022 is very different from the one that applied in 2017. Both of the above initiatives would have the result of increased contributions for more workers (and employers), though would these increases have the adverse effect of discouraging pension scheme participation? Therefore, it is unsurprising to see two statements that cast doubt on this mid-2020s ambition:


1. On 25 February 2022 in a comment that debated the Pension Schemes (Conversion of Guaranteed Minimum Pensions) Bill, Pensions Minister Guy Opperman said that the UK Government remained ‘committed’ to the 2017 review, however, did not mention the mid-2020s, only ‘we will, in the fullness of time, bring forward or support legislation to take the matter forward’

2. On 30 March 2022, as part of its written evidence to the Work and Pension Committee’s inquiry into the success of pensions freedoms, the Department for Work and Pensions (DWP) said ‘The government remains committed to implementing these core measures in the mid-2020s, subject to engagement with stakeholders on the implementation approach and finding ways to make these changes affordable’


So, there is a certain amount of evasion and confusion about the UK Government’s timeline for implementing these reforms. However, consultation and engagement takes time, as does the passage of legislation. So, are we looking at something very soon which will allow the mid-2020s deadline to be met? Or, considering that there will be a General Election in, possibly, 2024, are we looking at further delays?


Let nobody forget that employers, agents, bookkeepers, workers and software developers need time to prepare.