Employment & Pensions Blog: Auto-enrolment extension bill receives Royal Assent

The Pensions (Extension of Automatic Enrolment) Act received Royal Assent on 18 September 2023 and permits two extensions to automatic enrolment for pensions.

Changes in the law

Although the new 2023 Act will not automatically lead to pension changes, it does give the Secretary of State the power to make regulations to implement changes to auto-enrolment. The Act seeks to make 2 amendments to the current auto enrolment regime:

• Reduce the age for being automatically enrolled into a pension scheme; and
• Remove the lower earnings limit for contributions.

Under current legislation employees can be automatically enrolled into their workplace pension scheme at the age of 22. The new Act looks at lowering the minimum age for auto enrolment to 18. This means employers would be required to automatically enrol employees as soon as they reach 18.

As well as reducing the minimum age, the Act also looks at lowering the minimum earnings threshold, meaning employers will have to apply the auto enrolment contributions from the first pound, rather than only applying it to those earnings above the current limit of £192 a week.

The Act is aiming to help low earners and younger working to save into their pension and look after their financial futures. The DWP Press Release states that “the changes to Automatic Enrolment, combined with the Mansion House Reforms announced by the Chancellor in July, could see the average earner’s pension increase by nearly 50% if saving across their entire career, while a minimum wage earner could see their pension pot increase by over 85%.”

Minister for Pensions Laura Trott said “This will mean younger workers and those in lower paid employment will be able to fully participate in Automatic Enrolment. For the first time, every eligible worker will benefit from an employer contribution from the first pound earned – which will make a huge difference to their eventual pension.”

The Department for Work and Pensions will now launch a consultation on implementing the changes.

Comment

Whilst waiting for the consultation on implementation, employers can start planning to get ahead of the changes. Employers can review their workforce to understand how many employees the changes may affect and what additional cost there may be once the changes are made. However it is important to remember that not all those who will be eligible to be auto-enrolled as a result of the changes will want to be, and there will still be the option for employees to opt-out. 

If you would like any Employment or Pensions advice, please contact a member of our Employment & Pensions Team.