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Onward, nine pension firms call for extension of AE

written by Bella Palmer
pension-firms

The letter urges the government to reduce the AE age threshold from 22 to 18 and to gradually abolish the £6,240 lower earnings limit

Think tank Onward and nine pension firms have written to Chancellor, Rishi Sunak, calling for the extension of automatic enrolment (AE) to include younger people, part-time workers and people on lower incomes.

The letter urges the government to reduce the AE age threshold from 22 to 18 and to gradually abolish the £6,240 lower earnings limit.

It follows the news that MP Richard Holden’s Private Member’s Bill on extending AE did not receive its scheduled second reading, with Pensions Minister, Guy Opperman, stating that there was ‘no real way’ it would be ready in time for the Queen’s Speech.

Onward’s report on ‘levelling up pensions’, published in January, helped inform the bill, although its recommendation to remove the earnings trigger over a four-year period was not included.

The letter, signed by Onward, the Association of British Insurers, Aviva, Hargreaves Lansdown, Legal & General Investment Management, Just Group, Now Pensions, Standard Life, Scottish Widows and The Investing and Saving Alliance, warned that too many people miss out on the benefits of AE and called on the government to meet the mid-2020s reform deadline outlined in the 2017 AE Review.

Furthermore, the letter stated that extending AE would generate billions of pounds in capital for pension schemes to deploy towards infrastructure, housing and other investments.

AE has been a huge success since it was introduced a decade ago but too many younger and low-paid workers still miss out, stated Onward director, Will Tanner.

It is only right that the government corrects this oversight and extends them the benefits of AE, he said.

Extending AE to younger and low-paid workers would not just help individuals and their families save for the future, it would generate billions of pounds that could be invested in the government’s mission to level up the UK, he said.

Also commenting on the letter, Aviva director of workplace savings and retirement, Emma Douglas, said: Recent events, including inflation hitting record highs and the increased cost of living, means that it will be a financially challenging year for many, and long-term savings might not feel like a priority.

So, we are calling on government to put a ‘roadmap’ in place now for how and when it will implement the removal of the lower qualifying earnings limit and reduce the minimum age threshold to 18 years old for AE, she said.

Standard Life managing director of pensions and savings, Colin Williams, added: In just short of a decade, AE has helped increase the number of people saving for retirement and embed a saving culture within UK workplaces.

He said: We fully support both reducing the age at which people benefit from AE to 18 years old and the removal of the lower earnings limit, which is why we’ve signed this open letter to the Chancellor as many people are still missing out on the positives of AE.

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