Following its annual review of the pension automatic enrolment earnings trigger and qualifying earnings band, the government has decided that the earnings trigger will again remain at £10,000 for 2018/19. The earnings trigger determines at what point an eligible person gets automatically enrolled by their employer into a workplace pension scheme.
The qualifying earnings band sets minimum contribution levels for money purchase schemes. The minimum of the band is also relevant for defining who can opt-in if they earn under the earnings trigger. The earnings band will continue to be aligned with National Insurance contribution rates, i.e. £6,032 for the lower limit of the qualifying earnings band and £46,350 for the upper limit.
The government also conducted a review of automatic enrolment during 2017 to explore ways that the policy could be further developed to encourage more people to save into a workplace pension and it has now published its report, “Automatic enrolment review 2017: Maintaining the momentum”. The report confirms the government’s intention to lower the age at which employers are required to auto-enrol employees into a workplace pension scheme from age 22 to age 18. It also sets out plans to change the framework so that pension contributions will be calculated from the first pound earned, rather than from the current lower earnings limit of £5,876 (rising to £6,032 for 2018/19). Removing the lower earnings limit would mean that everyone earning over £10,000 and under £45,000 a year (rising to £46,350 for 2018/19), and who meet the other eligibility rules, would be automatically enrolled by their employer and get pension contributions on eight per cent of all their earnings. Those earning at or below £10,000 would not be automatically enrolled; however, if they opt-in they would also benefit from pension contributions on 8 per cent of all their earnings.
The report predicts that this change would operate as an incentive to those with multiple jobs to opt-in to a workplace pension scheme, as they would benefit from an employer contribution for every pound they earn in every job, up to the upper earnings limit. The government intends that these changes will take effect in the mid-2020s, subject to discussions with stakeholders during 2018 and 2019 that will explore how to approach implementation.