• Private member’s Bill proposes extension to auto-enrolment law
• State Pension Age review – terms of reference published
• Regulations made to implement de minimis for DC flat fee charges

Private member’s Bill proposes extension to auto-enrolment law

A backbench Conservative MP has introduced a private member’s Bill that in effect seeks to legislate for the Government’s stated ambition to extend the scope of and contributions required under the current auto-enrolment law.

The Government announced in the 2017 auto-enrolment review that it intended to reduce the lower age limit from 22 to 18 at which the employer duty to auto-enrol operates, and to remove the lower limit of the qualifying earnings band (currently £6,240 pa) within which minimum contributions are determined, so that contributions are calculated on all earnings up to the upper limit of the band (currently £50,270 pa).

However, these changes were not to happen until the mid-2020s.  Since then, whilst repeating the intent to take these actions, the Government has yet to do so.  The results of the 2020 auto-enrolment review are also awaited.

Richard Holden, MP for North West Durham, in his Pensions (Extension of Automatic Enrolment) Bill appears to be proposing to legislate for these changes – and seemingly the removal of the earnings trigger (currently £10,000 pa) above which the employer duty to auto-enrol arises.  Removing the trigger would bring in not only the low paid, but also those with more than one job, each of which pays less than the trigger.

The Bill had its First Reading on 5 January 2022, in what is a formality, and is scheduled to have its Second Reading on 25 February 2022, ahead of which the details of the Bill will become known when it is published.

To coincide with the introduction of the Bill, “Onward”, a right-leaning think tank, has published a paper that proposes the abolition of both the earnings trigger and the lower limit of the qualifying earnings band and the reduction of the lower age limit from 22 to 18 – such measures to be phased in over four years, concluding in 2026.

Comment

It is not clear at this stage whether this Bill has Government support, but it certainly has been prepared with the knowledge of the pensions minister and the Secretary of State.  All is likely to be revealed at Second Reading.

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State Pension Age review – terms of reference published

Following on from the announcement in December that the next review of the State Pension Age is to begin (see Pensions Bulletin 2021/52), the DWP has now published the terms of reference of the independent report on other specified factors to be led by Baroness Neville-Rolfe.

They provide that the report should explore what ‘metrics’ the Government should take into account when considering how to set the State Pension Age, including the following:

• Recent trends in life expectancy in all parts of the UK
• Whether the State Pension Age should continue to be set on the basis that people should expect to spend a fixed proportion of adult life above it (the policy laid down by the Coalition Government via the Pensions Act 2014)
• What metrics would enable State Pension costs, and the importance of sharing these fairly between generations, to be taken into account
• What additional or alternative metrics would be appropriate to take into account

The report also needs to have regard to both the sustainability and long-term affordability of the State Pension and the views of organisations, individuals, and other interested parties.

Comment

Currently, those reaching State Pension Age are doing so on their 66th birthday, but this will rise to 67 between April 2026 and March 2028.   A further rise to 68 between May 2044 and March 2046 is also provided for in legislation (although the previous independent report published in 2016 recommended bringing this forward to 2037-39).

However, as recent analysis by LCP demonstrates, the case for either increase currently legislated for is under the spotlight as expected life expectancy improvements have failed to materialise over recent years.  And this is before any lasting effects of the pandemic are factored in.

This points to a potentially difficult review for the Government if it is to adhere to the Coalition Government’s policy of seeking to ensure that a relatively fixed percentage of up to one third of adult life is spent above State Pension Age.  It seems likely that this policy will be weakened or even abandoned as the need to ensure the long-term affordability of the State Pension takes precedence.

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Regulations made to implement de minimis for DC flat fee charges

Regulations introducing a £100 threshold for default DC funds used for auto-enrolment, below which flat fees cannot be charged, have now been made and come into effect from 6 April 2022.  This follows the consultation outcome published last November (see Pensions Bulletin 2021/47).  The final regulations differ slightly from the draft exposed in the consultation, following feedback that the DWP received, but there are not any technically material changes.

The DWP’s non-statutory guidance on compliance with the charge cap has also been updated to explain these new requirements and includes examples of them.  A press release was also published to accompany the finalised regulations.

Comment

As we said in November providers and schemes affected by the £100 de minimis should now proceed with their projects to implement this by April – just three months away.

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