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Auto Enrolment Earnings Trigger Could Be Frozen

DWP Publishes Consultation And Will Announce Results At Autumn Statement


David Shirt, Press Officer | 0161 838 3094

The Department for Work and Pensions has today launched a consultation into whether the automatic enrolment earnings trigger should remain linked to income tax.

Currently auto-enrolment regulations mean that all UK employers must automatically place certain members of their workforce into a qualifying pension arrangement.

All employers must contribute to that pension arrangement and must monitor and keep records of their workforce’s membership of the scheme. The current threshold for enrolling an employee stands at £10,000.

The Government has proposed four options for consultation. These are freezing the earnings trigger at the current level of £10,000; raising the trigger by indexation, increasing the trigger to £10,500 in line with the income tax threshold; or using the Pensions Commission benchmark replacement rate to determine the trigger.

The DWP said: “The Government is now reviewing the current thresholds in readiness for next year and have decided that the timing is right for a further consultation. Given the number of employers who have now gone through the staging process, we hope to gain some valuable insight on the experiences of live running.

“We would also like to test whether maintaining the alignment between the earnings trigger and the income tax threshold remains right in the light of proposed increases to the threshold and suppressed earnings growth.

“If changes are made, these will come into effect on 6 April 2015. However, in order for as much of the process as possible to be automated, software providers will need advance notice of the Government’s intentions in relation to the new thresholds. We therefore propose to respond to this consultation in December, around the time of the Autumn Statement.”

Nigel Bolton, Pensions Partner at Irwin Mitchell, said:

Expert Opinion
This is certainly an issue that needs looking at because a key focus of auto-enrolment was to provide an occupational pension for all, including those on lower earnings. As the tax threshold increases, and the signs are that it will continue to do so, there will be potentially millions of people who no longer become eligible.

“What this also shows is that the auto-enrolment rules are constantly changing. The signs already are that SMEs in particular are struggling to cope with the back office administration requirements of AE. This latest development again highlights the need for an end-to-end online solution which enables employers of all sizes to keep on top of everything and ensure that they are compliant.”
Nigel Bolton, Partner

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