Lords urged to reduce auto-enrolment threshold

Lords urged to reduce auto-enrolment threshold

As the House of Lords debates the earnings trigger for auto-enrolment into a pension, experts are asking for a reduction from the current £10,000 level.

Under the current rules, anyone who earns more than £10,000 in a single job will be auto enrolled into a pension.

However, charity Citizens Advice said recently that low-paid workers, as well as those with more than one job, would lose out if the trigger remained at this level.

The charity is calling for the government’s auto-enrolment review - due out this year - to look at how the scheme can be extended to those missing out. 

The Department for Work & Pensions review will consider employees missing out, accruing contributions, the inclusion of the self-employed, minimum contribution levels and lowering the charge cap.

 Retirement experts at Scottish Widows yesterday (10 March) added their voices to the campaign to change the threshold.

Jackie Leiper, Scottish Widows retirement planning expert, said: "We’ve long championed lowering the £10,000 threshold for automatic enrolment and we hope that today, we will see this happen.

"We recommend that the earnings trigger for automatic enrolment is reduced considerably, and that contributions are based on full salary rather than band earnings as this would give a much-needed savings boost to low-paid and part-time workers."

Scottish Widows said that its recent research showed that 52 per cent of women are now saving adequately for retirement, compared with 41 per cent in 2007.

"We believe that this significant change in pension saving amongst women is due to automatic enrolment. But to continue being effective, automatic enrolment must continue to evolve and help more people get into the habit of saving for their future," Ms Leiper added.

Patrick Connolly, head of communications at Chase de Vere, also called for the threshold to be reduced. 

"As the UK workforce becomes more flexible, the current threshold of £10,000 can freeze out the increasing number of people who work part time or have more than one job and so there is a very strong case for looking to reduce it," he said.