DWP publishes supporting analysis for review of AE thresholds for pensions

DWP publishes supporting analysis for review of AE thresholds for pensions

The Department for Work and Pensions (DWP) has published supporting analysis for the review of the qualifying earnings band and earnings trigger for automatic enrollment (AE) into workplace pensions for the year 2021–2022. The analysis details the proposed thresholds of these for 2021–2022, the potential impact on various groups of changing these thresholds and general trends in pension saving.

The government has published the analysis supporting the review of the AE thresholds for 2021–2022. Following its annual review for 2021–2022:

• the AE earnings trigger will be maintained at £10,000

• the lower limit of the qualifying earnings band will remain at £6,240 and the upper limit will increase to £50,270 in order to maintain alignment with the national insurance contributions (NICs) lower and upper earning limits

The government says that the decision to maintain the AE earnings trigger at £10,000 reflects the key balance that needs to be struck between affordability for employers and individuals and the policy objective of giving those, who are most able to save, the opportunity to accrue a meaningful level of savings to use for their retirement. It also reflects the need for stability at this point in the light of the challenging economic circumstances arising from the coronavirus (COVID-19) pandemic and while the government continues to learn from the phased increases in minimum AE contribution rates in April 2018 and April 2019.

As regards the government’s decision to continue to align the lower and upper limits of the qualifying earnings band with the NICs lower and upper earnings limits, the government says that retaining the link between NIC levels and the qualifying earnings band limits provides an important element of consistency for employers, the pensions industry and payroll services. The government also reiterates its ambition, as proposed in its 2017 AE review, to remove the lower earnings limit in the mid-2020s, subject to learning from the phased AE minimum pension contribution increases in 2018 and 2019, discussions with employers and others on the right implementation approach, and finding ways to make the change affordable.

Source: Review of the automatic enrolment earnings trigger and qualifying earnings band for 2021/22: supporting analysis

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