Pensions - Articles - Timetable needed for implementing auto enrolment changes

Ahead of the government’s annual review of the auto-enrolment thresholds, Kate Smith, Head of Pensions at Aegon, suggests a continued freezing, rather than phasing out, of the earnings trigger and thresholds in April will help in the immediate term during the cost of living crisis, but the government should publish a timetable to implement the 2017 auto-enrolment review recommendations without delay.

 Kate Smith, Head of Pensions at Aegon: “The government is facing increasing pressure to put in place a timetable implementing the 2017 review of auto-enrolment recommendations, as recently demonstrated by a private member’s bill ‘The Pensions (Extension of Auto-Enrolment) Bill, which is due to get it’s second reading in Parliament on 25th February. This has gone a step further than the 2017 review recommendations by demanding the removal of the £10,000 earnings trigger allowing part timers, especially those with multiple low-paid jobs, particularly women, to automatically benefit from an employer pension contribution.

 “The 2017 recommendations will not only widen the scope of auto-enrolment, bringing in younger workers, but also enabling more people to save more. Currently too many people are excluded from auto-enrolment as they are too young, too old, don’t earn enough or are self-employed. The world of work has shifted dramatically since auto-enrolment was first designed in 2008 with the rise of the gig economy, zero hours, and the self-employed, Brexit, then Covid-19. The 2017 review recommendations has been talked about for over four years now, it’s high time that the Government puts a plan in place. Not doing so is a missed opportunity to level up the world of work.

 “The £10,000 a year earnings trigger was originally aligned with the personal allowance, until it was frozen on 6 April 2014. As the value of the earnings trigger has been frozen in real terms it’s meant that thousands more low-paid workers have been auto-enrolled into a workplace pension, benefitting from an employer’s pension contribution helping them to build a lifetime of financial security. If the earnings trigger had continued to increase in line with the personal allowance today it would be £12,570, with thousands more low paid workers, including those with multiple jobs with each one less that £12,570, would have been left out in the cold.

 “Auto-enrolment contributions are based on a band of earnings between £6,240 and £50,270 a year. The 2017 review of auto-enrolment recommended the removal of the salary offset so contributions are calculated from the first £. Due to a rounding anomaly the annual salary offset has been frozen at £6,240 for two years.

 “Every year the government reviews the levels of the auto-enrolment thresholds. This year there’s increased pressure to implement the 2017 review recommendations and the first step should be the continued freeze of the earnings trigger and salary offset from April 2022. It’s unrealistic to except these thresholds to start to be phased out from April given the cost of living squeeze on people’s pay.

 But to commemorate the 10 year anniversary of auto-enrolment, the Government should start to look at making auto-enrolment more inclusive by making pension saving the norm for all and fit for the modern world of work by publishing a timetable to implement the review recommendations without delay.”

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