Kate Smith, Head of Pensions at Aegon, comments: “For the sixth year running the auto-enrolment earnings trigger has been frozen at £10,000 a year. As one of the three factors which determines who is automatically enrolled into a workplace pension and gets the automatic right to an employer contribution, it’s an important one. Freezing the earnings threshold for another year, means that the real value of the threshold has fallen, allowing an estimated additional 8,000 employees to be auto-enrolled into their employer’s workplace pension.
“Mandatory auto-enrolment contributions are calculated on a band of earnings, with the lower and higher limits being linked to the National Insurance Contributions Lower and Higher Earnings Limits. This means that from April, auto-enrolment contributions will be calculated on a band of earnings between £6,240 and £50,270. The Lower Earnings Limit remains unchanged from last year’s limit, purely due to rounding. While the upper limit, after being frozen for a couple of years at £50,000 a year, has benefitted from a small increase. The impact of these changes will mean a very small increase in the amount of auto-enrolment contributions, particularly for lower earners, who are being disproportionately affected by the pandemic. Without the removal of the lower earnings threshold, as recommended in the 2017 review of auto-enrolment review, small changes to the threshold limits are likely to make very little difference to the amount auto-enrolled members save, and ultimately their retirement incomes.”
AE Review of Earnings Trigger and Qualifying Earnings Band 2021/22 Review
TPR AE Guide for Business Advisers Knowing Your Clients
The earnings band was increased to £10,000 in 2014/15.
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