18 Year Old Automatic Enrolment Workplace Pensions

Published / Last Updated on 21/12/2017

Automatic Enrolment Workplace Pension

The latest review by the Department for Work and Pensions on “workplace pensions” has suggested that the age limit where employees are automatically enrolled should be reduced to 18 from 22 years old.

What is a Workplace Pension?

The automatic enrolment of employees in a pension scheme at work started in 2012.  This means that all employers that have eligible staff must have already set up a ‘workplace pension’ by now.   Employees do have the option to opt out.  In simple terms, if you are eligible you will be automatically enrolled by your employer and you will then have the option to ‘opt out’ and not have a pension.

How Much Will Workers and Employers Pay and When?

Minimum contribution levels will be phased in between October 2012 and April 2019.

  • October 2012 to 5th April 2018 - total minimum pension contribution of 2% of qualifying earnings with at least 1% from the employer.
  • 6th April 2018 to 5th April 2019 - total minimum pension contribution of 5% of qualifying earnings, with at least 2% from the employer.
  • 6th April 2019 onwards - total minimum pension contribution of 8% of qualifying earnings, with at least 3% from the employer.  Workers paying 4% of qualifying earnings into a pension if you do not already (plus 1% tax relief), total 5% plus 3% from your employer.

Is reducing the age to 18 a good thing?

This may present some strain on employers as they will have to pay more into pensions if they have younger workers not previously eligible.  As far as younger workers are concerned, it is a good thing for them to start a pension earlier rather than later and get into the pension savings habit.  That said, at a young age, we are still formulating our career path and many younger workers may have a number of jobs with various employers before they settle into a role.  This could present administrative issues if you have had four jobs with four employers and four separate pension schemes by the time you are in your mid-twenties.  We suggest reducing the age to 18 is a good thing but transferring your pensions from one employer pension scheme to another should be as simple as a “one click” button or as part of the leaver service, when you receive your P45 you are also issued a Pension Scheme ‘P45’ for an automatic pension transfer to the new scheme.  We are not so sure the pensions industry nor employers will like this too much.