If you handle payroll or pensions, big policy changes are on the horizon that could impact auto enrolment processes at your organisation.
Recently passed legislation called the Pensions Act 2023 paves the way for reducing the minimum age for auto enrolment to 18 and removing the £192 lower earnings threshold.
While the exact timeline is still being consulted on, these changes will provide more young and lower earning workers access to workplace pensions. As an HR or payroll specialist, it’s key to understand and start preparing for what’s ahead.
Let’s dig into the details.
Lowering the Auto Enrolment Age to 18
Currently, the minimum age an employee can be automatically enrolled in their workplace pension is 22. But the new Act gives powers to drop this age to 18.
As reported by Lexology, this change would “require employers to automatically enrol employees as soon as they reach 18.” The goal is to help younger staff start saving earlier.
However, those aged 18-21 could still opt-out if they wish. So, education and communication with new staff will be vital.
Removing the £192 Weekly Earning Requirement
In addition to age, the lower earnings limit is on the chopping block too.
Lexology notes the Act enables “removing the £192 minimum earning requirement to qualify for auto enrolment contributions. This means employer contributions apply from the first pound earned rather than only above £192 weekly.”
In addition, Minister for Pensions Laura Trott said:
“This will mean younger workers and those in lower paid employment will be able to fully participate in Automatic Enrolment. For the first time, every eligible worker will benefit from an employer contribution from the first pound earned – which will make a huge difference to their eventual pension.”
What’s the Timeline and Next Steps?
The Department for Work and Pensions (DWP) will run a consultation to determine implementation logistics before changes take effect.
Lexology advises employers should use this lead time to analyse workforce demographics, model cost impacts, and plan communications.
Understanding who these changes impact at your organisation enables smarter preparation and minimised disruption.
While awaiting further guidance, the DWP expects these auto enrolment updates to significantly boost pension savings over workers’ careers.
Start Planning Your Approach
Workplace pensions can seem complex, but we’re here to guide you through current regulations and upcoming changes.
We partner with organisations to optimise auto enrolment processes while staying 100% compliant.
Reach out to start a conversation about preparing for the new Pensions Act. Together, we’ll ensure seamless implementation.