The UK's Work and Pensions Committee has launched an inquiry into whether minimum automatic enrolment (AE) contributions should rise and how the cost of any increase should be divided between employers and employees.

The cross-party committee said its inquiry would examine how AE could be reformed to improve retirement outcomes for low earners while ensuring that any additional contribution burden is shared fairly.

Although AE has succeeded in bringing more people into workplace pension saving, an estimated 15 million working-age people are undersaving for an adequate retirement income.

Minimum AE contributions currently stand at 8 per cent of qualifying earnings, comprising a 5 per cent employee contribution and a minimum 3 per cent employer contribution.

Workers generally need to earn more than £10,000 a year to be automatically enrolled.

However, the committee acknowledged that low earners, who are more likely to be undersaving, would also be among those most exposed to an increase in employee contributions.

It noted that small businesses operating with stretched resources could face similar challenges if the minimum employer contribution was increased.

The inquiry will therefore consider whether minimum contributions should rise, the appropriate level and timing of any increase, and how total contributions should be divided between employers and employees.

The government currently has no plans to increase minimum contributions but has asked the Pensions Commission to examine the long-term sustainability, fairness and adequacy of the pension system.

Its interim report, published in May, identified the issues that need to be addressed to improve the system's sustainability and warned that future generations were on track to face poorer retirement outcomes.

Work and Pensions Committee chair, Debbie Abrahams, said that the committee’s previous work had highlighted the damaging effects of pensioner poverty, including isolation, poorer health and a loss of dignity.

“The Pension Commission’s finding that we’re on course for tomorrow’s pensioners to be poorer than today’s was shocking,” she stated.

Abrahams added that action was needed, but policymakers must remain mindful of the burden that reform could place on low earners and employers.

She confirmed that the committee intended to inform the commission’s work by examining whether minimum contributions should increase and, if so, when, by how much and how the costs should be shared.

The committee is accepting written evidence until 4pm on 26 October 2026.

A report from the Pensions Policy Institute (PPI) earlier this year warned that no single reform to AE thresholds can protect every low earner from both retirement inadequacy and financial vulnerability during their working lives.

This article originally appeared in our sister publication Pensions Age.

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