Pensions Policy Unit publishes Briefing Note 105 looking at impact of AE on younger generations

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In summary their findings established:

• Millennials make up around 40% of the target group for automatic enrolment.
• Automatic enrolment has almost doubled the participation of 22 to 29 year olds in pension schemes.
• A 22 year old median earning man in 2017 may be able to achieve a pension fund of £108k under AE minimum contributions.
• Removing the triple lock on State Pensions could reduce the retirement income of a 22 year old low earner by 5%.
• A median earning 18 year old automatically enrolled under the AE Review recommendations, at age 18, with the lower earnings limit removed, could achieve a fund of £146k at their SPa, 32% higher than under the current AE policy.

The briefing note makes interesting reading. The impact of changes made to the AE structure will have a significant positive impact on the funds that can be achieved for future generations. Notably in the 2017 Automatic Enrolment Review the recommendations made were:

• Removing the lower limit on eligible salary – so contributions based on first £1 of salary
• Reducing the age limit to 18
• The ability to continue contributing post SPA

The AE space has made significant changes to the pension savings landscape with 9.3m eligible workers having been automatically enrolled. Now the process is business as usual for employers, it’s inevitable that the structure will be amended to maximise its impact. There is no shortage of research showing that low earners are being disadvantaged by the minimum contributions not being based on first £1 of income – rather from £5876 and then the question of tax relief for those not in a relief at source scheme will need addressing.

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