DWP plan to keep Automatic Enrolment trigger at £10,000 set to bring more low earners into pensions system

by | Jan 27, 2023

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Money jar with pension written on

AJ Bell head of policy development Rachel Vahey comments on the DWP’s plan to keep Automatic Enrolment trigger at £10,000.

She said: “It’s no surprise the DWP has opted to keep the status quo for 2023-24 for automatic enrolment triggers and limits. Keeping a £10,000 earnings trigger makes sense as it will draw more people into the automatic enrolment net as earnings increase. However, maintaining the upper band of earnings at £50,270 means higher-earning individuals will find a lower proportion of their total income is covered by automatic enrolment, meaning some will lose out on employer contributions and pensions tax relief on part of their salary.

“The DWP argues these higher earners are more likely to have access to a pension scheme that offers above the bare minimum and are more inclined to make personal arrangements for additional saving. But letting the upper band earnings limit lose pace with earnings risks people seeing their overall pension provision suffering as a result. The DWP’s own modelling shows that if it chose to increase the upper band earnings by CPI then total contributions (including tax relief) could increase by £160 million. 

“The DWP’s figures also highlight it expects total contributions to rise by over 5% to £74 billion next year. This includes an increase of almost 10% in income tax relief given on automatic enrolment pension contributions to just over £9 billion. 

 
 

“Automatic enrolment remains a success in policy terms. However, there are lingering questions over whether it goes far enough. This announcement follows on fast from the publication of the Government’s response to the Work & Pensions Select Committee’s report earlier this week. The Government is coming under increased pressure to review automatic enrolment, and in particular to bring in the changes it has promised for the mid-2020s of a lower automatic enrolment age and removing the lower band earnings limit completely. This timetable remains purposefully woolly, at a time when people are struggling to meet day-to-day living costs, and need all the help they can get to save for their financial future.’

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