The new Labour government has wasted no time emphasising pensions as a priority, with a Pensions Schemes Bill included in the King's Speech just one week after the election, and a "landmark" pensions review launched within the first month.

The review is expected to focus on adequacy in its second phase, a move broadly welcomed by industry experts given existing concerns over pensioner poverty levels.

In particular, many in the industry are hopeful that this review could drive progress on auto-enrolment (AE) reforms, with growing industry frustration over the lack of change in this area.

And with the cost-of-living crisis increasing financial pressures on workers, it’s no surprise there is an increasing demand for the government to take faster action to make sure savers are putting enough into their pensions.

But how and when to make these changes has been an area of debate in recent years. Here, Pensions Age takes a look back at the story of AE so far, and the industry’s hopes for the future.

The progress on the 2017 AE reforms

AE has come a long way since its implementation over a decade ago, with research from The Pensions Regulator finding that by 2022 over 10 million workers had been auto-enrolled into workplace pensions.

However, the pace of implementing the 2017 AE review recommendations, which aimed to develop AE to serve individuals and employers while improving the workplace pension system, has been slower than anticipated.

Since the 2017 AE review, minimum contribution rates have increased from 2 per cent to 5 per cent in April 2018, with at least 2 per cent from employers.

This increased further still, as a year later it rose to 8 per cent, with at least 3 per cent from employers.

But progress on other recommendations has been much more stagnant, as the review also recommended lowering the AE age to 18 and removing the earnings limit to help younger and lower-paid workers save more.

This proposal has been debated several times in parliament over the years. In 2021, Pension Minister, Guy Opperman, reaffirmed the commitment to these changes by the mid-2020s.

Other legislative efforts to introduce these changes have been made, with MP Richard Holden proposing a Private Member’s Bill to extend AE to all jobholders aged 18 and removing the lower qualifying earnings threshold in 2022, although this never passed the second reading stage.

Whilst unsuccessful, this bill paved the way for MP Jonathan Gullis' Private Member’s Bill in March 2023, which quickly gained traction in the House of Commons and the pensions industry, even garnering support from the DWP.

The bill, which proposed extending AE to jobholders under 22 and reducing or removing the qualifying earnings threshold, faced some debate around the exact changes and implementation of the bill, but passed its second reading and gained Royal Assent in September 2023.

This was welcomed by the pensions industry, with AJ Bell head of policy development, Rachel Vahey, highlighting the passing of the bill as a “significant step on the road to improving outcomes for millions of pension savers”.

But the bill did not mandate immediate changes, instead granting the Secretary of State powers to amend the age limit and lower the qualifying earnings threshold for AE, and industry figures have since branded the bill a “bitter disappointment”, given the delays in implementing these changes.

Comments from the then Pensions Minister, Laura Trott, on the reform timeline did nothing to ease existing concerns relating to the increasing financial pressures on workers due to the cost-of-living crisis and pension adequacy concerns.

Amid industry concerns over the ability of the government to meet the mid-2020s deadline for implementation, Trott suggested in February 2023 that a timeline for the 2017 AE reforms would be set once a collective agreement had been reached.

Five months later, she reiterated her commitment and said she hoped to share a consultation “as soon as humanly possible” after Gullis’ bill worked its way through the House of Lords.

But further progress has been limited, and the former government failed to hold a consultation on the issue before the July 2024 election.

Mounting conerns

In the meantime, industry concerns around pension adequacy have persisted and grown, particularly in light of rising prices and increasing pensioner poverty rates.

Recent figures from the DWP have also sparked renewed calls for AE reform, revealing that the while the average annual amount saved per eligible employee in 2023 remained below that of 2021.

“We still have an under-saving issue in the UK and more needs to be done to help people secure a decent standard of living in retirement", Standard Life managing director, Gail Izat, warned.

The risks facing specific under-pensioned groups has also been highlighted, with industry research revealing that many individuals from different demographics are disadvantaged by the pensions system itself and the way AE is structured.

Now Pensions and the Pensions Policy Institute (PPI), for instance, revealed that of the 14.6 million employed women in the UK, around 2.5 million (17 per cent) do not meet the qualifying criteria for AE, compared to 8 per cent of male employees.

And this is an issue that is worsening, as Now Pensions and the PPI found that pension gaps for some of the most financially at-risk groups have worsened in recent years, as private pension incomes of under-pensioned groups remain below three-quarters of average population private pension incomes.

More recent research also showed that one in three working single mothers are ineligible for a workplace pension under current AE rules, whilst those taking on a carer role also often face difficulties due to the current AE rule structure.

But this also means that AE reforms have the potential to help address issues such as the gender pension gap, as Hargreaves Lansdown head of workplace saving analysis, Clare Stinton, pointed out that changes to bring lower earners and younger workers into AE could help women in particular, as they are far more likely to work part-time and so currently miss out on AE.

Establishing the right timing for the changes has been an area of debate given the recent cost-of-living crisis, but calls for a roadmap for the new government to outline a roadmap or timeline have been gaining traction.

With Chancellor, Rachel Reeves, launching a ‘landmark’ review of the pensions system, which is expected to consider adequacy in its second phase, many are hopeful that change could be on the horizon, sooner rather than later.

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