26 January 2023
If you are covering the review of the automatic enrolment earnings trigger and qualifying earnings band for 2023/24, please see the following comment from Jon Greer, head of retirement policy at Quilter:
"The continued impact of the pandemic and the cost of living crisis has prompted the Department of Work and Pensions (DWP) to keep the Automatic Enrolment (AE) earnings trigger, the point at which an individual's salary opts them in for automatic enrolment to their workplace pension scheme, at £10,000. Additionally, the DWP has also chosen to freeze the lower earnings limit, the point from which an individual's earnings are used to calculate the amount of pension contributions that will be paid into a scheme, at £6,240.
"Both moves will have been carefully weighed by the government as it needs to navigate the delicate balance between addressing the financial pressure on low income households at the moment while still adhering to the recommendations of the government's 2017 review of Automatic Enrolment and helping as many people as possible save in a pension. While saving for retirement is key, low income workers must balance this need with hanging on to as much of their money as possible to stay afloat in this economic climate. As pensions secretary Laura Trott mentions it must make economic sense for someone to be putting money into their pension and keeping the earnings trigger where it is for the time being is a sensible move as the nation’s finances recalibrate to higher costs.
"A potential alternative option the government could have opted for would be to increase the lower earnings limit of the qualifying earnings band so that it once again aligned with the national insurance lower earnings limit, but this approach would have moved the lower earnings limit further away from the 2017 AE recommendations and would have actually reduced pension contributions for the lowest earners.
"As and when the financial situation of households improves, future reviews may lean towards adopting the 2017 government review's recommendations, such as lowering the age threshold for Automatic Enrolment from 22 to 18. However, it is logical for the DWP to wait for household finances to be on a more stable footing before expanding this successful policy to help more people save for their retirement."
