Govt to keep AE earnings trigger at £10,000

The government has confirmed that the auto-enrolment (AE) earnings trigger threshold will remain at £10,000 in 2020/21.

In a response to a parliamentary question, Pensions Minister Guy Opperman said that this year’s annual AE review concluded that the level would remain the same “to ensure the continued stability of the policy".

He added: “We also want to ensure that our approach continues to enable individuals, for whom it makes economic sense, to save towards their pensions whilst also ensuring affordability for employers and government.”

Opperman also confirmed that the lower and upper earnings limits will continue to be aligned to the National Insurance contribution thresholds.

He will lay an Order before parliament after the February recess to amend the Pensions Act 2008 so that, for 2020/21, the AE earnings trigger will be remain at £10,000, the lower limit of the qualifying earnings ban will be £6,240 and the upper limit of the qualifying earnings band will remain at £50,000.

Commenting on the announcement, The People’s Pension director of policy, Gregg McClymont, said that although AE has been a “huge success”, the 10 million people that remain ineligible to save through AE cannot be ignored.

“There is clearly a balance to be struck between increasing auto-enrolment coverage among the low paid and bringing in those on the very lowest salaries for whom it doesn’t make financial sense,” he said.

“If the government reduced how much you need to earn to be eligible for auto-enrolment to the primary national insurance threshold of just over £6,000, on previous calculations it would help an additional 1.2 million people save for their future, including those with multiple jobs currently ineligible.

“A big majority of these people would be women, and a significant percentage from ethnic minorities, helping address stark gender and ethnicity pension gaps."

However, LCP partner, Steve Webb, said that it may be a positive for lower-paid workers.

He commented: "The repeated freezing of the £10,000 threshold for automatic enrolment will be good news for lower-paid workers, more of whom will be brought into the scope of automatic enrolment as earnings rise.

"This will be particularly true for those covered by the national living wage who have seen substantial real increases in recent years."

The analysis for the proposed revised AE thresholds will be published “in due course”, Opperman concluded.

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