The Department of Work and Pensions (DWP) has released their Review of the earnings trigger and qualifying earnings band for 2016/17. Stating that 'Automatic enrolment is now entering a crucial stage in the roll out of this major reform and it is not considered to be the right time to make significant changes to the existing framework,' the government have decided not to raise the earnings trigger threshold. However, this will be kept under review in light of the forthcoming introduction of the National Living Wage in 2016 and the government's pensions tax relief consultation.
By freezing the auto enrolment earnings trigger at £10,000, when taking into account inflation and wage rises, it is in effect a real terms decrease in the trigger. It is suggested that this freeing will result in welcoming an extra 130,000 people into the auto enrolment, of whom 90% will choose to stay within the occupational pension scheme that they are placed in. However, not everyone has seen the freezing of the auto enrolment earnings trigger as a good thing. General Secretary of the Trades Union Congress (TUC) Frances O'Grady sees it as a negative move in light of the success so far of auto enrolment.
"By freezing the earnings trigger for automatic enrolment, the government has missed the opportunity to bring millions of low paid and part-time workers into the pensions system."
"We know from the success of automatic enrolment that relying on these groups to voluntarily opt-in to pension saving is a very ineffective way of reaching more workers. Without action, we risk leaving lower earners without the vital benefits provided by regular pension savings."
The freezing of the earnings trigger for auto enrolment may seem like a negative move but the decision looks like it has been taken with an eye on the forthcoming introduction of the National Living Wage. The introduction of this in April 2016 will see a lot more people eligible for auto enrolment and thus will see more and more saving towards their retirement.
Other announcements in the review include the raising of auto enrolment qualifying earnings upper limit from £42,385 in 2015/16 to £43,000 in 2016/17, whilst the lower limit qualifying level will stay at £5824.