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Provision was made in the Pensions Act 2008 to place 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.

After the 2010 general election, the Coalition Government set up a review to look at whether the proposed scope for the policy was still appropriate in the light of developments since it was formulated. The Making Automatic Enrolment Work Review recommended an optional waiting period of up to three months before an employee needs to be automatically enrolled and an increase in the earnings threshold for auto-enrolment. These changes were legislated for in the Pensions Act 2011. Other core aspects of the policy were confirmed by the review. For example, the new duties apply to all employers regardless of size.

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. The minimum contribution has also been phased-in, reaching its full amount (8% in total, including 3% from employers, 4% from employees and 1% tax relief) from April 2019.

The policy has reversed the decline in workplace pension saving. An evaluation of the policy in 2019 showed that:

  • Since the start of automatic enrolment in 2012, more than 10.2 million workers have been automatically enrolled;
  • By 2018, the number of eligible employees participating in a workplace pension had increased to 18.7 million (87 per cent), up from 10.7 million (55 per cent) in 2012;
  • Opt-out rates have remained low, at around nine per cent.

Although for these reasons the policy is widely viewed to have been a success, there are concerns that an estimated 12 million people may still be under-saving for retirement. To go some way to address this, a review of the policy in 2017 recommended lowering the age threshold for auto-enrolment from 22 to 18 and removing the lower limit of the ‘qualifying earnings’ band, so that contributions are payable from the first pound earned. The Government said it intended to implement these changes in the mid-2020s. (Cm 9546, December 2017). Some argue that this should be brought forward (e.g. PLSA 2019; TUC Feb 2019). Other issues of current debate include:

  • The need for changes to enable low earners to benefit from tax relief regardless of how their scheme administers tax relief. The Government said in Budget 2020 that it would issue a call for evidence on this, but did not refer to this in a recent update (para 2.28). However, work on this has been delayed due to the Coronavirus outbreak (PQ60728 26 June 2020).
  • When and how contribution rates should increase above the 8% minimum (e.g. HC Deb 28 Feb 2018, c401WH ff).

Employers’ auto-enrolment duties continue to apply during the Coronavirus outbreak. The Government has provided employers who furlough their staff under the Coronavirus Job Retention Scheme (CJRS), with grants to cover 80 per cent of a furloughed worker’s regular salary (capped at £2,500 per month), and the statutory minimum pension and NI contributions on those wages.  From 1 August, the grant will no longer cover pension and NI contributions. This is part of the phasing-out of the CJRS, which is due to close at the end of October 2020 (PQ5613, 9 June 2020; TPR, COVID 19 guidance for employers, updated 15 June 2020).

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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