The automatic enrolment pension scheme could be extended under a new Conservative bill.

Tory MP Richard Holden will put forward a Private Member’s Bill in the House of Commons on Wednesday, January 5 which would see the auto-enrolment for pensions to millions of younger and part-time workers.

The MP for North West Durham will lay out a proposal to extend the current scheme which requires bosses to have a workplace pension for staff aged 22 and over earning £10,000.

The Argus: Piggy bank with a £20 note. Credit: PAPiggy bank with a £20 note. Credit: PA

Mr Holden has said that the changes will help close the gap between men’s and women’s pension savings and secure the retirements of millions of people.

What is the automatic enrolment pension scheme?

You are automatically enrolled in a pension scheme if:

  • You work in the UK 
  • You aren’t already in a suitable workplace pension scheme
  • You are at least 22 years old, but are under the State Pension age
  • You earn more than £10,000 a year for the current tax year

Instead of opting into a pension scheme, you are automatically enrolled and are required to make pension contributions alongside your employer.

There is a minimum that you need to contribute - generally, the figure is five percent from you and three percent from your employer. 

If you are unsure what this means to your paycheck practically, you can use this workplace pensions contribution calculator to find out.

Who will be affected by the changes to the automatic enrolment pensions?

The bill proposes to extend the automatic enrolment to working 18-year-olds and part-time employees.

In a report titled Levelling Up Pensions, the centre-right think tank Onward said that the current workplace pension participation rate is 20 percent for 16 to 21-year-olds and 58 percent for part-time employees.

For full-time employees, the figure jumps to 86.4 percent, according to the think tank.

“Auto-enrolment has been one of the massive hidden triumphs of the last decade in the UK, but sadly millions of hard-working British people aren’t benefiting because they’re under 22 or simply not working enough hours," says the North West Durham MP.

"I want to change that. In 2017 the Government said that it would look at extending auto-enrolment by the mid-2020s but to hit those dates we need legislation now to make it happen and allow business time to phase in these important changes. That’s what my Bill will do.

Mr Holden added: “Nothing could show clearer intent towards long-term levelling up than ensuring that everyone who works hard will see a safer and more secure retirement and I hope that the Government backs my campaign for action now.”

Mr Holden's Pensions (Extension of Automatic Enrolment) Bill will be presented to the Commons on January 5, but it is thought unlikely to succeed without ministerial support.

While the Department for Work and Pensions (DWP) aims to abolish the lower earnings limit as well as reduce the age for automatic enrolment, it does not plan to do this until the mid-2020s.

A DWP spokesperson said: “Automatic enrolment has succeeded in transforming pension saving, with more than 10 million workers enrolled into a workplace pension to date and an additional £28.4 billion per year being saved since 2012.

“The Government’s ambition for the future of automatic enrolment will enable people to save more and to start saving earlier by abolishing the Lower Earnings Limit for contributions and reducing the age for being automatically enrolled to 18 in the mid-2020s, benefiting younger people, low-paid and part-time workers as they will receive contributions from their employer from the first pound earned.

“We want to make sure that these changes are made in a way and at a time that is affordable, balancing the needs of savers, employers and taxpayers.”