The Government has confirmed the following figures, relating to automatic enrolment obligations, for the 2017/18 tax year:
- £10,000 for the automatic enrolment earnings trigger, unchanged from 2016/17,
- £5,876 for the lower limit of the qualifying earnings band, equal to the National Insurance Lower Earnings Limit, and
- £45,000 for the upper limit of the qualifying earnings band, equal to the National Insurance Upper Earnings Limit.
The increase in the qualifying earnings band, and the freezing of the earnings trigger, are expected to result in an additional £71 million being invested in automatic enrolment schemes in 2017/18 compared with 2016/17.
Background
When individuals are auto-enrolled into a pension arrangement, contributions are paid as a percentage of their earnings within a “qualifying earnings band”. There is also an “automatic enrolment earnings trigger”: people earning less than this trigger do not have to be auto-enrolled.
The Government is required to review all these figures ahead of each tax year and to decide whether or not they should be changed. The review may take into account:
- personal taxation allowances,
- earnings thresholds and limits for National Insurance purposes,
- the level of the Basic State Pension and
- the general level of prices.
In addition, as in previous years, the Government considered the following principles:
- maximising the number of people brought into pension saving who will actually benefit from saving, while avoiding the automatic enrolment of those who are unlikely to benefit,
- the gap between the bottom of the qualifying earnings band and the earnings trigger should be such as to ensure so that all those who are automatically enrolled benefit from a meaningful level of contributions,
- costs and benefits to individuals and employers should be balanced appropriately.
The Government is due to undertake a wider review of automatic enrolment during 2017. Therefore a further consideration of this review of the thresholds has been not to pre-empt the outcome of that wider review.
The automatic enrolment earnings trigger
The level of the automatic enrolment trigger should strike a balance between maximising pension saving for those for whom saving is valuable and minimising the automatic enrolment of those for whom it is not. The Government has, therefore, kept the trigger at the level of £10,000, where it has been since 2014/15. It estimates that this will bring an additional 70,000 people into automatic enrolment, nearly 75% of whom will be women (who are disproportionately represented among the lower paid).
The qualifying earnings band
The Government will continue to align the lower level with the National Insurance Lower Earnings Limit and the higher level with the National Insurance Upper Earnings Limit. This produces a de-minimis annual contribution of £82.48.