AE reforms one step closer with Lords reading
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The third reading of the Pensions (Extension of Automatic Enrolment) (No. 2) bill is due in the House of Lords on Monday. After this reading, the bill is expected to receive royal assent, turning it into law.
The private member’s bill is sponsored by Jonathan Gullis, Conservative MP for Stoke-on-Trent North, and by Baroness Ros Altmann. Pensions minister Laura Trott gave her support to it in March this year.
The bill introduces reforms recommended by the Automatic Enrolment Review 2017, which the government said it would implement in the mid-2020s.
The government's intention is that the provisions in the bill will not result in any immediate change but will give the secretary of state powers to amend the age limit and lower qualifying earnings limit for automatic enrolment.
Before these powers can be used, there will be a statutory requirement to consult and report on the outcomes to inform the implementation approach and timing, to “help ensure the strong consensus that underpins the success of automatic enrolment is maintained”, the Department for Work and Pensions said in March.
The pensions industry widely supports the reforms that will increase pension savings levels and direct more money into pension schemes.
Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association said: “It is very positive news that the extension of automatic enrolment bill will have its third reading today. If passed, it will be an important step forward in achieving adequate, fair and affordable pensions for everyone,” he said.
The bill will lower the minimum enrolment age from 22 to 18 and scrap the lower earnings limit, meaning contributions will be calculated from the first pound earned.
The PLSA wants reforms to go further in future, and is reiterating its call for increasing the minimum contributions and splitting them equally between employers and employees. They are currently at 3% for employers and 5% for employees.
Peaple said: “For savers to reach an adequate income in retirement, further increases are still needed over the next decade so that AE rises from the 8% pension contribution today to around 12% in the early 2030s – split 50/50 between employers and employees.”
The Association of British Insurers has also called for 12% contributions.
Do you expect more opt-outs when the AE reforms are implemented?
