By Laura Blows
New auto-enrolment thresholds proposed by government could prevent almost two million women from being auto-enrolled, the TUC warned today.
The government is set to introduce a new earnings trigger for auto-enrolment, following their review that recommended workers should only be auto-enrolled once their earnings rose above the income tax threshold (£7,475). They would still pay contributions from the bottom of the earnings band. The TUC added that linking auto-enrolment with the income tax threshold is particularly damaging given the coalition plans to increase it to £10,000.
According to the TUC, women would be the main losers from the new earnings trigger as the vast majority of workers with pay between the lower limit of the earnings band and the income tax threshold are women working part-time.
The TUC’s analysis of earnings from the Annual Survey of Hours and Earnings 2011 found that more than one in seven female workers (15.5 per cent or 1.9 million) currently earn more than the current lower earnings band (£5,564) but under £10,000. One in three female part-time workers (1.7 million) earn between the current lower earnings band and £10,000. Men are less likely to be affected by this change as just half a million men earn between the current lower earnings band and £10,000.
Nearly one in five workers (4.4 million) currently earn less than £10,000, although this includes two million workers who earn less than the current lower earnings band and would never have been auto-enrolled into pensions, it added.
Therefore the TUC has called on the government to freeze the lower thresholds for auto-enrolment, keeping the bottom of the earnings band for contributions to be paid (£5,564) and the earnings level at which auto-enrolment is triggered (£7,475) at their current levels.
However, it suggested that the government could increase the band of earnings on which contributions have to be paid if it also increases the upper limit on the earnings band to £42,475. This would keep the link with the National Insurance Contributions upper earnings limit, as recommended by Lord Turner's Pensions Commission.
TUC general secretary Brendan Barber said: “The government should use its review of the thresholds to widen the earnings band each year by freezing the lower limit, while increasing the upper band limit in line with earnings. This would give a small manageable increase in the earnings band each year. It's the pensions equivalent of fiscal drag - raising more tax by freezing tax thresholds.
“In particular we urge the government not to raise the auto-enrolment earnings trigger in line with the income tax threshold, which the coalition is keen to raise to £10,000. Whether this is the best way to help the low-paid is an interesting debate, but it would be disastrous if it had the unintended consequence of excluding a significant proportion of women workers from pensions saving.”