Automatic Enrolment: Labour proposes greater access for lower paid workers

Labour has proposed changes to the Automatic Enrolment rules, which could see an extra 1.5 million workers join a workplace pension.

At present only workers earning above £10,000 per year must be automatically enrolled. Employees earning between £5,772 and £10,000 are classed as ‘non-eligible jobholders’ and as such are not automatically enrolled. However, if they choose to join a workplace pension their employer must contribute.

The threshold has led to criticism that millions of workers, the majority of whom are women, will miss out on a workplace pension.

Automatic Enrolment rule changes?

If they win the next General Election, Labour plan to reduce the Automatic Enrolment entry level to £5,772, equivalent to the National Insurance lower earnings limit. Rachel Reeves, the Shadow Work & Pensions Secretary, said: “Retirement should be something to look forward to, but for far too many people the insecurity they face during their working life is set to continue when they retire.”

She continued: “With the rise in zero-hour contracts, part time and low paid jobs and insecure work, an increasing number of people risk missing out on the chance to save for their retirement. The government’s failure to encourage more people to save threatens to store up huge costs for taxpayers in the future with a rising benefits bill.”

The move has been criticised by some, with the Institute for Economic Affairs saying: “Extending Auto Enrolment down the earnings scale will nudge people into joining pension arrangements who can ill afford to do so. The proposals will also load yet more costs onto employers, both administrative costs and costs of the employer matching contribution. Politicians should be making it easier, not more difficult, for employers to take on more staff. The effect of these proposals will be to exacerbate cost of living pressures by putting downward pressure on take-home pay,”

The news comes in the same week that Labour has announced it will launch an independent taskforce to look at how savers can boost their retirement income.