DWP to reconsider auto-enrolment earnings trigger

DWP to reconsider auto-enrolment earnings trigger

The Department for Work & Pensions will conduct a review of automatic enrolment in 2017, five years after the system was launched.

In a statement released today (12 December), pensions minister Richard Harrington said the DWP would begin consultation in the "early part of 2017", and publish its final recommendations "towards the end" of the year.

Introduced in 2012, the automatic enrolment system requires employers to automatically enroll their employees in a workplace pension on an opt-out basis. 

Automatic enrolment requires employer and employee each to contribute at least 1 per cent of earnings within a set band to their pension, increasing to 3 per cent and 5 per cent respectively by 2019. 

Mr Harrington said the main focus of the review would be "to ensure that automatic enrolment continues to meet the needs of individual savers".

This would include considering how to extend auto-enrolment to individuals with multiple jobs who do not meet the eligibility criteria in any of their individual jobs.

This, he said, would include examining auto-enrolment thresholds such as the earnings trigger, the qualifying earning bands, and the eligibility age (currently 22 years old).

Currently the earnings trigger for auto-enrolment is £10,000. The lower earnings band, meanwhile, stands at £5,824, while the upper limit is £43,000. 

The lower and upper earnings band will increase to £5,876 and £45,000 respectively in the next tax year, Mr Harrington also revealed today (12 December).

He said the government would also consider ways to help the self-employed - who are currently excluded from auto-enrolment - to save for their retirement.

He added the government would investigate whether the 0.75 per cent charge cap on auto-enrolment pension schemes was appropriate.

"The review will be an opportunity to strengthen the evidence around appropriate future contributions into workplace pensions," Mr Harrington said. 

"It will also consider how engagement with individuals can be improved so that savers have a stronger sense of personal ownership and are better enabled to maximise savings."

He said the review would be conducted by a team within DWP with the help of an independent advisory group.

The members of this group, along with the terms of reference, will be published at the beginning of 2017.

Mr Harrington added the government did not expect to make any actual policy decisions on these areas during 2017.

Mr Harrington's senior minister, secretary of state for work and pensions Damian Green, said: "This government is committed to building a country which works for everyone, not just the privileged few, and now is the right time to consider who else – beyond the 10 million already set to benefit – could gain from automatic enrolment."

Joanne Segars, chief executive of the Pensions and Lifetime Savings Association, said: “Automatic enrolment has been a huge success to date, with almost seven million more people now saving for retirement. 

“The 2017 review is an opportunity for the government to set a direction for the next decade of automatic enrolment.

"This should include the creation of an independent commission to advise on how and when to increase contributions in future as well as careful consideration of the current coverage of automatic enrolment.