On this Saturday, 6 April 2013, the earnings thresholds used in workplace pension reform (WPR) will change:
- the automatic enrolment earnings trigger - this was £8,105 in the 2012/13 tax year and will increase to £9,440. This ensures the threshold is aligned with that for Pay As You Earn (PAYE) (and therefore the threshold at which income tax is payable);
- the lower limit of the qualifying earnings band - this was £5,564 in the 2012/13 tax year and will increase to £5,668. As a result, the lower limit remains aligned with the lower earnings limit for National Insurance purposes; and
- the upper limit of the qualifying earnings band - this was £42,475 in the 2012/13 tax year and will fall to £41,450. This ensures that the upper limit remains aligned with the upper earnings limit for National Insurance purposes.
The Department for Work and Pensions (DWP) has signalled its intention to make WPR as simple to administer as possible by changing the figures from the start of the tax year and ensuring these are aligned with other payroll and PAYE figures.
As noted in our previous alert, this will still cause headaches for employers that have or will be staging around the transition. Employers with between 10,000 and 19,999 workers in their largest PAYE scheme had to comply with the reforms from 1 March 2013. Initially, they will have to communicate with their workforce based on the 2012/13 threshold figures still in force. Also, they will have to communicate with workers to ensure they understand that these figures will change from 6 April 2013.
The situation is potentially even more difficult for those employers with between 6,000 and 9,999 workers in their largest PAYE scheme who staged yesterday. These employers will be subject to employer duties based on the 2012/13 figures, but will then shift to the 2013/14 figures less than a week later on 6 April 2013.
Our previous 'Moving the WPR goal posts' alert highlighted one possible solution - that employers could use postponement to delay their employer duties until after the new figures are introduced.
To guide businesses through dealing with the reform, Wragge & Co's Pensions team has gathered analysis, videos and useful links in a dedicated workplace pension reform micro-site. For more detail on implementing the reforms, why not take a look at our comprehensive guide and glossary. This has now been updated to reflect the figures in use on and from 6 April 2013