Reforms to extend UK workplace pensions to young people ‘stuck in limbo’

Reforms to expand UK workplace pensions to millions of young people are “stuck in limbo”, industry experts said, after the government declined to set a timetable for the rollout of changes approved by MPs.

Last March, the government supported a private members bill that would extend the workplace pension automatic enrolment programme to 18-year olds and remove a restriction on how much of a worker’s salary is eligible for pension contributions.

On Thursday, Paul Maynard, pensions minister, said the government was still “committed” to the changes, but did not say when the measures would be introduced.

“We will lower the eligible age, and remove the lower savings limit so the contributions are payable on the first pound of earnings,” he told a Pensions and Lifetime Savings Association conference in Edinburgh.

“We intend to consult on the details of the measures at the right time . . . that is most viable,” he said.

Following the minister’s speech, the Department for Work and Pensions said it was committed to the expansion of automatic enrolment “in the mid-2020s”.

But pension experts said the looming general election — it has to be called this year — had placed the reforms into further doubt.

“The Department for Work and Pensions has a vast amount of work on its to-do list already,” said Tom McPhail, director of public affairs with the Lang Cat, a corporate consultancy.

“So while not impossible, I think it is unlikely we’ll see any progress made . . . this side of the general election and for now they seem stuck in limbo.”

Steven Cameron, pensions director with Aegon, a pension provider, said there was “no reason” why the government couldn’t start the consultation process now. Government consultations — which seek input on proposed measures — typically run for about 12 weeks, but can be quicker.

Aegon has previously calculated that the reforms would mean millions of employees across the UK would see an extra £499 put into their pension each year.

“With the ongoing cost of living crisis, the government does need to consider carefully when to actually introduce the changes, which will lead to millions of individuals having an extra £499 a year paid into their pension,” Cameron said.

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“So, while they may say it is not ‘viable’ to introduce the changes right now, progress is overdue and needed.”

Announcing support for the expansion of automatic enrolment last year, Laura Trott, then pensions minister, said the changes were “widely supported” and would make a “meaningful difference” to people’s pension saving.

Currently, only those aged between 22 and the state pension age, 66, are eligible to be automatically enrolled into a workplace pension by their employer. Employers are obliged to contribute at least 3 per cent of pensionable salary to the employee’s retirement pot with the worker paying at least 5 per cent.  

The reforms would see the automatic enrolment age lowered from 22 to 18 and both contributions counted from the first pound of salary. Currently, contributions are based on earnings above £6,240.  

Labour, which supported the proposal last year and is well ahead in the polls, has yet to set out whether it will implement the reforms. It did not immediately respond to a request for comment.