Proposed automatic enrolment thresholds for 2017-18
12 December 2016
The Department for Work and Pensions (DWP) has published their review of the automatic enrolment earnings trigger and qualifying earnings band for 2017-18 which includes the current and proposed thresholds as per the table below.
Current and proposed automatic enrolment thresholds
|
|
Trigger |
Lower limit qualifying earnings band |
Upper limit qualifying earnings band |
|
Current (2016/17) |
£10,000 |
£5,824 |
£43,000 |
|
Proposed (2017/18) |
£10,000 |
£5,876 |
£45,000 |
Although the Secretary of State has some flexibility in the way the amounts for the earnings trigger and qualifying earnings band are set, section 14 of the Pensions Act 2008 sets out certain factors which the Secretary of State may take into account in reviewing these amounts. The Government can set out policy objectives and the principles that should inform the setting of the thresholds. It cannot pre-determine thresholds or the approach for future years.
The first two annual reviews established three principles to be used when reviewing the automatic enrolment thresholds. These principles were endorsed by stakeholders and we believe that they remain relevant:
(i) Will the right people be brought in to pension saving? In particular, at what level will the earnings trigger bring in as many people as possible who will benefit from saving? At what level does the trigger need to be set to avoid the automatic enrolment of those who are unlikely to benefit from saving? And what are the equality implications of the different options?
(ii) What is the appropriate minimum level of saving for people who are automatically enrolled? Everyone who is automatically enrolled should pay contributions on a meaningful portion of their income. To ensure this, we need to maintain an appropriate gap or de minimis between the lower limit of the qualifying earnings band and the earnings trigger.
(iii) Are the costs and benefits to individuals and employers appropriately balanced? The cost implications of the thresholds remain relevant and we need to factor in the continuing importance of simplicity. Alignment as far as possible with recognisable tax and NICs thresholds simplifies system builds, provides compatibility with existing payroll systems and makes automatic enrolment as easy as possible to administer and explain.
Further information
Ministerial statement on the automatic enrolment 2017 review and the thresholds review
2016 automatic enrolment research report