Labour to announce auto-enrolment plans for an extra 1.5 million workers
12th June 2014 | News
Labour is expected to announce plans to reduce the threshold for auto-enrolment eligibility that would see an additional 1.5 million workers enrolled into a pension scheme.
The party plans to reduce the threshold from £10,000 per annum to £5,772, according to the Financial Times.
Within the 1.5 million new people eligible for automatic enrolment into a pension scheme is around one million women.
Currently, only workers who earn a minimum of £10,000 and who are aged between 22 and state pension age, are automatically enrolled. Others can opt into qualifying schemes, but must request to do so.
The shadow work and pensions secretary, Rachel Reeves, believes the proposals, if implemented, would assist low income workers.
“With the rise in zero-hours 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,” said Reeves.
“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.”
However, pensions experts have cautioned the plans, suggesting they would only cause more burdens for businesses occupied with meeting their existing auto-enrolment obligations.
Tom McPhail, head of pensions research at Hargreaves Lansdown, said: “Simply lowering the threshold back down to £5,772 creates its own problems, because you then end up dealing with some very small sums of money.”
David White, managing director, Creative Auto Enrolment, added: “These proposals need some careful consideration.
“Our recent research has shown that auto enrolment is causing business difficulties, with just 15 per cent of those staging in the next year feeling well qualified to deal with preparations.
“Simplifying the categorisation of workers will make the process easier for businesses and anything that makes it easier for employers is to be welcomed.
“However, before we make any changes to the legislation we need to get the policy right and consider the interaction with single tier state pensions – which are currently set in the middle of this earnings band – as well as the charging structures on small pension pots.”