In today's Automatic Enrolment Review, the Government announced changes that will mean even more people have access to the benefits of a workplace pension.
The changes include removing the lower earnings limit to support people with low earnings and multiple jobs, lowering the age threshold for automatic enrolment from 22 to 18, and testing a range of different approaches aimed at increasing pension participation among the self-employed.
But what exactly might those changes mean for you? Read on to find out how you'll be affected as the proposals take effect.
Today: At 18, you are not eligible for automatic enrolment into a workplace pension until the age of 22, although you are free to sign up to a private pension scheme or opt to join a workplace pension scheme if one is offered by your employer.
Mid-2020s: Changes proposed in the review mean that the age threshold is expected to drop to 18 in the mid-2020s, so you'll be automatically enrolled earlier by your employer and you’ll both pay in to your pension scheme.
Today: Anyone aged 22 or over who earns above £10,000pa (or £833 per month, or £192 per week) will be automatically enrolled. You will be enrolled in a workplace pension, contributing a minimum of 0.8% of your qualifying earnings, while your employer contributes 1.0% minimum. However, current rules mean the first £5,876 you earn is not pensionable.
2018/19 and beyond: Contribution rates for both and your employer are going up next year. From April 2018, you'll be contributing 2.4%, and from April 2019, 4.0%. Your employer will also be contributing more (2.0% from April 2018, and 3.0% from April 2019), so you’ll be saving more for your retirement. In the mid-2020s, the rules will change and every pound you earn will be pensionable. It means your contributions will add up faster, making it pay to save.
Today: As an employer, you have to auto-enrol any employee aged over 22 and earning more than £10,000pa into a workplace pension scheme - your employees are aged 18 and 25, so, you need to enrol only one of your employees in the scheme. Even if you only employ one person, if they meet the criteria for auto-enrolment it's your responsibility to offer a workplace pension.
Mid-2020s: Both your employees will now meet the criteria for auto-enrolment, as the age threshold is planned to drop to 18. This means you must extend your workplace pension offer to both employees. Contribution rates are also changing in 2018 and 2019, so by the mid-2020s, you’ll be contributing a minimum of 3.0% of their qualifying earnings into your employees’ pension pots.
Today: The current auto-enrolment scheme doesn't apply to people who are self-employed, so you won’t be automatically enrolled in a pension scheme. If you want to save for your retirement, you need to sign up for a private pension scheme and start putting money aside.
2018/19: The review sets out a range of proposals to help self-employed people save for their retirement, including trials on saving alongside doing your tax return. Two million self-employed people are currently under-saving for their retirement, and the review’s proposals aim to make sure that you can save easily for your retirement.
