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Provisions in the Pensions Act 2008 placed a duty on employers to automatically enrol jobholders into, and to contribute to, either a “qualifying pension scheme” or a new personal accounts scheme, a “simple low-cost pension scheme”, also established by the Act, now the National Employment Savings Trust (NEST). The plan was to introduce these requirements from 2012.

Following the 2010 general election, the Coalition Government set up a review to look at whether the policy was still appropriate. The core aspects of the policy were confirmed: for example, the new duties would still apply to all employers regardless of size. To help employers, the Pensions Act 2011 introduced an optional waiting period of up to three months before an employee must be automatically enrolled and an increase in the earnings trigger for auto-enrolment.

The auto-enrolment duties were phased-in by employer size, starting in October 2012 with large employers. Small and micro employers were brought into the reforms between June 2015 and February 2018. Minimum contribution rates were phased-in, reaching their full amount (8% in total: including 3% from employers; 4% from employees and 1% tax relief) in April 2019.

The policy has reversed the decline in workplace pension saving. The rollout of automatic enrolment from 2012 onwards has led to a tenfold increase in total membership of defined contribution (DC) occupational schemes, from 2.1 million in 2011 to 21 million in 2019. Actively contributing membership rose from a low point of 0.9 million active members in 2011 to 10.6 million members in 2019. Note that an individual can have more than one pension scheme membership – as people move from job to job, they may accumulate several pension pots in different occupational schemes.

Employers’ auto-enrolment duties have continued to apply during the Coronavirus outbreak. Employers applying for grants under the Coronavirus Job Retention Scheme for periods of furlough before 1 August 2020 could claim the cost of the statutory minimum employer pension contributions on furlough pay. From that date they have had to meet these costs themselves, both on furloughed hours and hours worked (TPR guidance, updated December 2020).

A report from the National Employment and Savings Trust (NEST) in February 2021 looked at the impact of the COVID-19 outbreak on its 9.5 million members. It found no significant changes in average contribution levels: the majority had continued to save, with around one fifth contributing more than the minimum contribution rate. There had been a small increase in opt-out rates (from 8% to 11% between April and September 2020). That the overall story so far was one of continuity “owed much to the buffering effect of the UK government’s Coronavirus Job Retention Scheme.”

Although auto-enrolment is widely agreed to have been a success, there are concerns that many (an estimated 12 million) are still under-saving for retirement. A review of the policy in 2017 recommended lowering the age threshold for auto-enrolment from 22 years to 18 and removing the lower limit of the ‘qualifying earnings band,’ so that contributions are paid from the first pound earned. The Government said its ambition was to implement these changes in the mid-2020s (Cm 9546, December 2017, p4). On 5 November 2020, Pensions Minister, Guy Opperman said “our intention is that [these changes] should take place in the mid-2020s ”(PBC Deb 5 November 2020 c119). Some argue that this should be brought forward (e.g. PLSA 2019; TUC Feb 2019).

Other issues include:

The draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Regulations 2021 are due to be debated on 1 March 2021. These regulations set the thresholds for auto-enrolment and are an annual event. Under the regulations, the ‘earnings trigger’ for auto-enrolment remains frozen at £10,000 and the lower and upper limits of the ‘qualifying earnings band’ (on which minimum contributions are calculated) remain linked to the National Insurance lower earnings limits at £6,240 and £50,270 (DWP, Review of the AE earnings trigger and qualifying earnings band for 2021/22, Jan 2021).

The background to the reforms is covered in more detail in Library Standard Note SN 4847 Pensions: auto-enrolment – background (September 2012)


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