It is now 10 years since auto enrolment was introduced in the UK

Looking back

At the time, I was working at the Regulator and tasked with educating both professionals (who were building the solutions for employer compliance) and employers, making them aware of their duties. At times conversations were heated, particularly from some in the advisory sector and smaller employers, who believed auto enrolment would put many of these small employers out of business. In reality this has not been the case, though, despite the pandemic and the current cost of living crisis.

Auto enrolment has in fact been a success, with the Regulator reporting that by the end of September 2022 nearly 10.8 million people had been automatically enrolled as eligible jobholders and nearly 12 million people were already in a pension scheme at the point their employer was due to stage or reached its duties start date. Auto enrolment has relied on inertia and this has proven successful, with average opt-out rates still remaining below 10%, much lower than was initially anticipated. Employers have even come to terms with the complexities of re-enrolment, with most employers having now gone through at least two cycles. 

Maintaining the momentum

However, despite the successes of auto enrolment, we continue to see segments of society excluded, usually because they are in low-paid employment or have part-time jobs. In its review of auto enrolment in 2017 under the strapline of “Maintaining the momentum”, the government identified 12 million people who were still undersaving. This included those:

• whose employer calculated contributions on banded earnings
• who earned more than £10,000 per annum but it was made up of multiple employments and therefore they were classified as non-eligible jobholders by each employer
• entitled workers who had earnings below the lower earnings limit
• younger workers aged between 18-21 who were also excluded from being eligible jobholders

The report sought to address these issues by reducing both the age eligibility criteria for auto enrolment and the thresholds at which workers would be entitled to receive contributions or be automatically enrolled. Additionally, the review aimed to bring the self-employed into the scope of auto enrolment.

The future

Since 2017 little has happened, whether because of other government priorities or due to the pandemic. However, momentum is beginning to build, initially as a result of a parliamentary Private Members’ Bill lodged by Conservative MP Richard Holden. This proposes reducing the age at which someone becomes an eligible jobholder to 18 and removing the £10,000 earnings threshold. The minister of state at DWP Guy Opperman had also indicated that he intended to act upon recommendations in the review.

Most recently, however, the Fabian Society has published its paper, “Good Pensions For All”, with the support of the Association of British Insurers. This examines proposals for the development of pensions policy for a future Labour Government. It reiterates many of the recommendations of the 2017 review, whilst also looking at the next steps to increasing the proportion of earnings that need to be saved to improve the adequacy of pension savings.

What is clear is that consensus remains across the political spectrum – no mean feat! The question is when, rather than whether, there will be a broadening inclusivity of auto enrolment to provide greater savings adequacy in retirement. Whilst some may say that now isn’t the right time, with the cost of living crisis, it remains the case that millions of people continue to be under-prepared to face retirement as they remain excluded from auto enrolment.

Along with many in the market, I would like to see these changes being made as soon as possible, with a clear timeline for next steps to increasing contributions.