08 February 2022
If you are covering the review of the automatic enrolment earnings trigger and qualifying earnings band for 2022/23, please see the following comment from Jon Greer, head of retirement policy at Quilter:
“With people’s finances increasingly squeezed by the looming cost-of-living crisis, the Department of Work and Pension’s has taken the decision to keep the Automatic Enrolment earnings trigger, the point at which your salary opts you in for automatic pension withdrawals, at £10,000, bringing 17,000 more people into pension saving. At the same time the DWP has frozen the lower earnings limit, the threshold at which your earnings qualify for pension deductions, at £6,240.
“The government has had to strike a balance at a time when household finances are stretched while not deviating from the recommendations of the government’s 2017 review of Automatic Enrolment, which recommended abolishing the lower earnings limit completely. Arguably the difference in terms of money in people’s pockets is relatively small, but at a time when people are struggling with the increased cost of living there is genuine pressure on the trade-off between income today and income in old age.
“The alternative would have been to increase the lower earnings limit in line with national insurance thresholds. Not only would this have moved the lower earnings limit further away from the 2017 AE recommendations, but would have actually reduced pension contributions for the lowest earners.
“Future reviews are likely to lean further towards the adoption the 2017 government review, which included lowering the age threshold for AE from 22 to 18. With recent statistics from the Bank of England showing that consumer credit borrowing increased by £800m in December 2021 on top of an additional £1.2bn of borrowing in November 2021, the DWP may need to wait for the household finances to be on a surer footing first. Once we have weathered the current squeeze on finances, it will then be prudent to start to look at how this successful policy can be widened so more people can benefit from saving for their retirement.”
