Planned Changes to Pensions
Workplace pensions will be reshaped from the mid-2020s, in a move that will bring millions more people into the pensions regime and may increase costs and complexity for employers.
Contributions will be calculated as a proportion of earnings for all staff earning up to the higher-rate tax threshold of £45,000. At present, the first £5,876 of earnings is excluded from pensionable income. The move is designed to ensure that individuals in multiple jobs whose combined income totals more than £10,000 are enrolled into a pension scheme by their multiple employers, according to the Department for Work and Pensions.
The age at which employees can start building a retirement fund will also be lowered. In the mid-2020s – but not yet at a specific date – every employee aged 18 or over will be able to save into a workplace pension, as opposed to the present age of 22. This will pull an additional 900,000 people into a pension scheme through a widespread extension of auto-enrolment.
A spokesperson for the Pensions Regulator said lowering the age threshold would mean “more people will have the opportunity to benefit” from saving for their retirement.
In further pension changes, staff and employer pension contributions are to increase to 5% between the two parties from April 2018, with employees putting in a minimum of 3% of annual salary. By April 2019, these levels will increase again to 8% – 5% for employees and 3% for employers.