Auto-enrolment proposals for change mean rising costs for employers

Proposed legislation to amend auto-enrolment pensions to include thousands more employees, including younger workers and lower earners is likely to result in higher costs for employers.

A bill has been introduced to Parliament that would see the minimum age for auto-enrolment reduce from 22 to 18 and remove the £10,000 minimum earning threshold that currently triggers automatic enrolment, meaning that all workers over 18 would be enrolled.

It is estimated that lowering the auto-enrolment age would allow younger workers to save an additional £20,267 when they retire. Currently just one in five 16-21 year olds has a workplace pension. However, the expansion of auto-enrolment is likely to lead to higher costs for employers who currently contribute at least 3% towards employees’ pension savings and employees with a large number of part-time staff are most likely to see cost increases under the proposal. If it goes through, the proposal would help workers with multiple jobs, who currently have the earnings limit applied separately to each job.

As further updates are available on this subject 121 HR Solutions will provide guidance to employers.

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