Under the Pensions Act 2008, every employer in the UK must enrol certain staff into a pension scheme and contribute towards it. The new automatic enrolment age due to be introduced in the mid-2020s will apply to all those from 18 years old that are earning more than £10,000 from one job.
These eligible criteria mean that almost 900,000 teenagers will be introduced to saving an additional £800m. However, many people were quick to criticise the news, including former pensions minister Sir Steve Webb who said that the “proposed pace of change is shockingly lethargic” as reforms taking place by the mid-2020s “risk leaving a whole generation of workers behind.”
However, Work and Pensions Secretary, David Gauke reminded us of the positive outcomes of the new reform: “After decades of decline in workplace pension saving, we are now seeing increases”. Gauke goes onto state that by extending the workplace pension to people 18 and over instead of 22 and over, will get more people into the habit of saving, and “will mean that younger people will be saving for those extra years, which is significant when it comes to their retirement.”
With the review to lower the age of automatic enrolment, came other recommendations including calculating contributions from the first pound earned and for the Government to look at ways to improve opportunities for self-employed workers to save for their pension. He has admitted that the increase in contributions may put people off but evidence shows that op-out rates for pension schemes have been much lower than predicted.