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The Actuary The magazine of the Institute & Faculty of Actuaries

Pension auto-enrolment earnings trigger frozen at £10,000

The earnings trigger for when individuals are automatically enrolled into a pension scheme will remain at £10,000 for 2017/18, the Department for Work and Pensions (DWP) have announced today.

Threshold will not change for next year ©Shutterstock
Threshold will not change for next year ©Shutterstock

In addition, an order will put before parliament in the new year proposing the upper limit of the qualified earnings band be £45,000, and £5,876 for the lower one.

This was detailed in a government document giving supporting analysis for their revised auto-enrolment thresholds for the next tax year.

It states: “The Secretary of State has re-considered all the review factors against the latest analytical evidence and policy objectives, and decided that the current threshold of £10,000 remains the right level and therefore will not change for 2017/18.

“This strikes the right balance between administrative simplicity and consistency for the employers implementing automatic enrolment up to 2018, ensuring that the people brought into pensions saving are likely to benefit.

“Setting the earnings trigger below £10,000 would increase the number of low paid workers saving into a workplace pension, however, it would not meet some of the six main overall aims of the review.

“We want to ensure that the right people are brought into savings, and we also want to balance the costs and benefits between individuals and employers.”

Automatic enrolment has resulted in almost seven million people being enrolled into a pension scheme by nearly 300,000 employers, and is expected to generate around £17bn a year in additional workplace pension saving by 2019/20.

However many people in low paid or part-time jobs do not currently benefit from the programme, with a report from the Pensions Policy Institute last month showing that 77% of employees earning less than the auto-enrolment trigger are women.

Scottish Widows, retirement planning expert, Jackie Leiper, said: “The decision of the DWP to freeze the trigger at £10,000 for the next tax year will mean the continued exclusion of many part-time and low paid workers.

“Twice as many women as men have two jobs, yet are still below the £10,000 threshold. We believe automatic enrolment should be available to as many people as possible and call on the government to reduce the threshold.”

The DWP also announced that a 2017 review into auto-enrolment would consider employees missing out, accruing contributions, the inclusion of the self-employed, minimum contribution levels and lowering the charge cap.