The recommendations that are to be outlined in the Automatic Enrolment Review could put “rocket boosters” on people’s retirement savings, the industry has commented.

Commenting on the possibility of lowering the auto-enrolment age threshold and removing the lower earnings limit, AJ Bell senior analyst Tom Selby said: “These reforms could put rocket boosters under people’s retirement savings. By bringing younger savers into the reforms and ensuring every pound of earnings is used to calculate pension contributions, the government will make another dent in the UK’s savings crisis and significantly increase the amount of money going into pensions.”

It is hoped that the recommendations in the review, as outlined by the DWP, will assist and encourage improved pension saving for the younger generations and the self-employed.

PLSA director of external affairs Graham Vidler commented: “We are particularly pleased to see government taking on board our proposal to reduce the age threshold from 22 years old to 18 years old as the earlier people start saving the better their retirement will be. The changes suggested today will have a material impact on younger people’s pension savings.

He noted that the reduced age threshold and scrapping of the lower earnings limit could mean that an individual who starts saving at 18 could build a pot that is 15 per cent larger than someone who started saving at the age of 22.

Scottish Widows head of pensions policy Peter Glancy also voiced support for the proposed lower qualifying age and highlighted the possibility to lessen the pensions gender pay gap. “The DWP’s decision to reduce the age at which workers are auto-enrolled from 22 to 18 is something we’ve been calling for as it would be of particular benefit to women – many of whom need as much time as possible to build up savings while in work to compensate for time away to bring up children or look after elderly relatives.”

Furthermore, highlighting that the number of self-employed people contributing to a pension fell from 1.1 million to 380,000 between 2001 and 2015, Vidler added that: “The review appears to recognise the complexity of this issue and we feel that pilot projects with the self-employed are the right way forward.”

Standard Life head of pensions strategy Jamie Jenkins, who led the review on the theme of coverage agreed that the proposals in the review “is right…to include young workers and those who might not have a standard employment set-up.”

Although the review is set to make pensions more attainable for more people, Selby added that the inclusion of the self-employed is questionable. “There remains a huge question mark over auto-enrolment for the self-employed. The Conservative Party made a manifesto commitment to include them in the auto-enrolment reforms. Most would regard the new pledge to simply encourage self-employed people to save in a pension, rather than them being auto-enrolled and having to opt out, as breaking this manifesto commitment – hardly a road the government will want to go down having already had its fingers burnt when trying to raise NI contributions for the self-employed,” he explained.

TUC general secretary Frances O’Grady is also sceptical about the extent to which the recommendations of the review could help lower income workers. “This review is a mixed bag. It’s great that pension contributions will cover all of a worker’s pay packet – this is something unions have long called for. But the review has missed a vital opportunity to bring more low-paid workers into workplace pensions, leaving millions of women out in the cold. If the government doesn’t fix this problem, pensioner poverty will increase,” he said.

Nonetheless, while the review is mostly set to be positive for the industry and savers alike, the timeframe in which the DWP has suggested the recommendations will be in place has been criticised.

Royal London director of policy Steve Webb has stated that the “proposed pace of change is shockingly lethargic”.

“Talking about having reforms in place by the mid-2020s risks leaving a whole generation of workers behind. Those who never got to join a final salary pension and who have only recently come into pensions through auto-enrolment need urgent action to help them build up a decent pension pot. This pedestrian pace of reform risks creating a ‘lost generation’ of people in their late forties and fifties who will simply be unable to afford to retire,” Webb added.

Also looking at the review’s future plans, The People’s Pension policy director Darren Philp discussed the DWP’s intention to review contribution rates after the rise to 8 per cent in 2019.

“As well as widening access to pensions, this review signals that pension contribution levels will be reviewed after the implementation of the 8 per cent contribution rate in 2019. For many people we know that saving 8 per cent of their salary won’t be enough and what we need is a real and urgent debate as to what the right level needs to be in the future.”

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