The Department for Work and Pension releases Automatic Enrolment report, confirming the earnings trigger and qualifying earnings band for 2021-22

21 January 2021

The Department for Work and Pensions (DWP) has published its review of the earnings trigger and qualifying earnings band for tax year 2021-22 for Automatic Enrolment (AE).

The AE earnings trigger dictates the earnings level at which an eligible person is automatically enrolled into a workplace pension, whilst the qualifying earnings band determines the minimum contribution levels for money purchase pension schemes. The minimum of the band also relates to who can opt in, should they earn below the earnings trigger.

An annual review of the levels is carried out by the Government, at which point they are altered, if it is deemed appropriate. Under AE, employers are required to enrol any workers who meet age and earnings criteria into a workplace pension.

On the basis of the latest analytical evidence and policy objectives, the Secretary of State has determined that the existing earnings trigger threshold of £10,000 will remain in place for tax year 2021-22. This is upon consideration of affordability for both employers and individuals, particularly considering the impacts of coronavirus, and the need for consistency in uncertain times.

The lower limit of the qualifying earnings band will also remain unchanged for 2021-22 and will continue to be set at £6,240.  This maintains the link with the National Insurance Contributions (NIC) Lower Earning Limit (LEL). The upper limit will be increased, in line with the NIC Upper Earnings Limit (UEL) for tax year 2021-22, at a value of £50,270. This is the point at which mandatory employer contributions are capped.

The following table is provided:

 

Trigger

Lower limit qualifying earnings band

Upper limit qualifying earnings band

Current (2020/21)

£10,000

£6,240

£50,000

Proposed (2021/22)

£10,000

£6,240

£50,270

CIPP comment

The CIPP is part of the Net Pay Action Group, which seeks ways to address an anomaly in the pensions tax relief system which means that low earners are missing out on a 20% boost on their pension contributions, if they earn over the AE trigger level and have a tax-free allowance that exceeds that amount, where they are enrolled in a net pay arrangement pension scheme.  If you have any feedback or comments on this topic, please email [email protected] so that we can cascade the information back to the group. Thank you in advance.

 


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