What you need to know about upcoming pension changes

October 16, 2023

By Nicole Brendel

A new law which came into force last month is likely to lead to an expansion of the pension auto-enrolment rules for all employers. Our employment team give their top tips for getting ready.

The Pensions (Extension of Automatic Enrolment) Act 2023 received Royal Assent in September 2023. The new Act allows changes to be made to the provisions of the automatic enrolment scheme into workplace pensions.

A reminder of the current rules

Currently, employers must auto-enrol all workers into a workplace pension scheme in the following circumstances:

• When the worker is above the age of 22 but under the ‘pensionable age’ of 75;
• When the worker earns above £192.00 per week. This is the current ‘lower earnings threshold’. Workers who earn below the threshold currently do not need to be automatically enrolled into a workplace pension scheme.
• The minimum contribution is currently 8%, of which 3% must be contributed by the employer.

Employers may delay the automatic enrolment by up to 3 months past the worker’s start date.

Workers are entitled to opt-out of automatic enrolment but can choose to opt back in at any time.

What’s likely to change?

The Department for Work and Pensions is expected to commence a consultation this Autumn on prospective changes. A previous review suggested the following changes take effect:

• Automatic enrolment from the younger age of 18; and
• Automatic enrolment from the first £1 earnt, therefore meaning the ‘lower earnings threshold’ will be scrapped.

These recommendations could be implemented along with further changes as well, e.g. possibly lowering the automatic enrolment age to 16.

The idea behind these possible changes is to get younger workers with lower earnings in the practice of saving for their pension from an earlier point in their careers. Due to this, even with a general election looming, it is anticipated that changes to the automatic enrolment provisions will be made because such provisions will very likely have cross-party support.

Top tips to get ready for the likely changes

• Keep an eye on any information about the expected consultation. We will be providing updates as they arise;
• Consider how many of your current workers are likely to be impacted by the changes, taking into account those currently under 22 or workers who currently earn below the lower earning threshold. This could extend to any casual workers or temporary workers who previously would not have been eligible for automatic enrolment but who may fall within the scope of the revised rules;
• Consider what additional costs there may be to include additional workers in the pension scheme should these changes come into effect;
• Start preparing to update any workers who will be affected about the changes (however you do not have to make any changes / announcements yet);
• Keep in contact with your current pension provider to ensure they are also ready for the possible changes.

If you need any advice on the above, please contact Nicole Brendel, or a member of our employment law team in confidence here or on 02920 829 100 for a free initial call to see how they can help.